Solidarity levy to end for all

The margin for additional support measures within the year will to a great extent be determined by whether the country can increase tax takings significantly above what the budget provides for – or more than 50 billion euros. As of 2023, the solidarity levy will be abolished for everyone, Prime Minister Kyriakos Mitsotakis announced on Saturday.

“My intention is for the solidarity levy to become a thing of the past for every Greek as of 2023,” Mitsotakis told Skai TV, adding that the second increase in the minimum salary this year will be far greater than the 2% granted on January 1. “I cannot tell you yet how big… My wish is to go as far as small and medium-sized enterprises can take it.”

However, there is no space for any horizontal support measures at this stage. “There will be no measures without cautious calculations, as we have certain fiscal targets. There will be no horizontal measures, but only targeted ones for the weakest, for as long as the energy crisis rages, and we hope it is temporary,” the PM stated, adding that he expects the crisis to ease as of this May.

Any additional handouts within the year – which will in any case have to be extraordinary and temporary – can only be discussed and decided if an unforeseen tax revenue cushion of over €600 million can be created. That is because the leeway of over €400 million has already been committed to the reduction of the Single Property Tax (ENFIA) and the additional boost to farmers, which had not been included in the 2022 budget.

Another difficult equation will be the drafting of next year’s budget, with the need for a return to a primary surplus of around 1.5% of gross domestic product. That will require a fiscal adjustment of €5-6 billion from this year.

For the government to collect more tax revenues this year and next without raising the taxation rates, one or both of the following sources will have to outperform: takings from the income tax of individuals and corporations, thanks to high economic growth, and/or value-added tax revenues, via an increase in consumption and the rise in the prices of essential goods such as fuel.