Greek Government Mulls Flat Income Tax

by Lorys Charalambous, Tax-News.com, Cyprus

12 July 2005

The government of Greece is considering a radical tax reform that could see the introduction of a flat rate of income tax on both corporate and individual income in two years' time.

According to reports in the national press, under plans drawn up at the request of Economy and Finance Minister Giorgos Alogoskoufis, a flat rate of income tax for companies and individuals would be levied at 25% and may be introduced on January 1, 2007, applying to income earned in 2006.

Also, it is thought the amount of income that will be exempt from income tax will rise to EUR13,000 (US$15,700), up from EUR11,000 under the present system. Presently, income between EUR11,000 and EUR13,000 is taxed at 15 percent, between EUR13,000 and EUR23,000 at 30 percent and above EUR23,000 euros at 40 percent.

Greece continues to face difficulties sticking to fiscal targets and ran a budget deficit equal to 6.7% of gross domestic product in 2004 - more than double the 3% ceiling required of members of the eurozone - so Prime Minister Costas Karamanlis is said to be supportive of Alogoskoufis's plan as it would replicate pro-business tax reforms being carried out in some of the new EU member states and boost the Greek economy.

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