Huge blow to tax revenues

The Finance Ministry will sacrifice 2-2.5 billion euros in income taxes to keep enterprises alive and save jobs.

While this year’s budget provided for income tax revenues from individuals and corporations of €14.7 billion, up €1 billion from 2020, this is eventually expected to come to less than €12.5 billion.

The budget anticipated corporate income tax revenues of €3.4 billion – some €830 million more than last year – but the processing of the declarations is now expected to bring this year’s due to €2.5-2.7 billion, following the decision to reduce the corporate income tax deposit by €900 million, just like last year.

Individuals were projected by the budget to pay taxes of €10.2 billion, which is about €160 million more than in 2020, but that is unlikely to happen given the fourth phase of furloughs that has already opened a hole in tax collections, mainly from the tax withheld.

In total the support measures that will have an impact on tax revenues – mainly income tax – will lead to an amount of €1.8-2 billion that had not been factored in in the budget: Besides the €900 million from the slashed deposits, there is also the €500 million for the program to subsidize fixed corporate spending – in the form of tax credit to offset tax obligations – and the approximately €150 million to help recipients of loans in the first three phases of the cheap state loans program cover their tax dues this year.

Furthermore, the suspension of the solidarity levy will help the self-employed, those with revenues from rents and others with €150-200 million, plus another similar amount from the new tax rate for the self-employed, announced in late 2019, that will start applying this year.

The tax declarations are likely to further impact the budget, in that there will be many recipients of tax rebates: In 2020 there were 1.1 million tax rebate recipients, but this year they likely to reach 1.6-1.7 million, with the sum of the rebates soaring from €380 million last year to €500-600 million in 2021.