Taxes eat away at income
The brackets have not been updated to account for inflation for the past five years
From 2020 to the end of 2023, gross earnings rose 11% and the income tax corresponding to these earnings rose 41%.
The much-trumpeted abolition of the so-called “solidarity contribution” and the reduction of social security charges – both measures promised and delivered by the ruling conservative government that presented them as really caring for the wage earners which the previous, leftist-led SYRIZA government had bled dry – has been canceled, and then some, by this rise in income tax.
New Democracy’s promise for salaries to converge with the EU average remains unfulfilled, and, because of higher inflation in goods and some services, divergence has increased.
According to data from the Organization for Economic Cooperation and Development (OECD), gross annual earnings averaged €12,554, having taken a hit throughout the decade due to the financial crisis. The income tax on those earnings averaged €946, which included the solidarity contribution. Social security charges added another €2,443.
The conservative government, which gained power in 2019, moved swiftly to increase the minimum wage, something last done before the crisis, during which it had been significantly cut. The rise – many rises in fact – helped boost gross earnings, which reached €17,685 at the end of 2023, a 10.93% gain on 2020.
But, despite the abolition of the solidarity contribution, the average income tax stood at €1,334, or 41.01% higher than in 2020. Social security contributions were almost unchanged, at €2,452, a 0.37% gain.
Because of some changes in the tax code, an expected 3% gain in earnings will be outpaced by a 7.5% rise in the income tax and disposable income will grow by 2.5 percentage points lower than inflation.
Since the present government took over in 2019, it has not updated the tax brackets to account for inflation. This would not have been a major issue in previous years when, because of the crisis, inflation was negative and then rose to very low levels.
