Tax-free threshold set to drop

The government is hoping that a deal can be reached with the country’s creditors by proposing that it reduce the tax-free threshold from 9,550 to 9,100 euros of annual income and tax the revenue bracket of 9,000-25,000 euros at a higher rate. Meanwhile, some odd statements from the Finance Ministry on Friday gave the impression that some of its officials are starting to crack under the pressure.

With this latest proposal the government appears to be converging with the creditors’ ideas of expanding the taxpayer base by increasing the contribution of the low- and medium-income brackets, which comprises some 2.8 million taxpayers who currently pay very little tax.

A ministry official said a deal is very close, but stressed the creditors’ insistence on a drop in the tax-free threshold, which the International Monetary Fund wants to amount to no more than 7,000 euros. It is therefore possible that for the bailout review to continue, the two sides will reach a compromise somewhere in the middle, possibly around 8,500 euros.

The government has proposed five income brackets, with rates starting from 22 percent, for revenues up to 25,000 euros, and reaching up to 50 percent for takings over 80,000 or 100,000 euros. Talks will also include increases in the tax on property rental incomes, the Single Property Tax (ENFIA) as well as the special consumption tax on fuel.

Finance Ministry officials launched a sarcastic offensive against the IMF on Friday, accusing it of excessive demands on income taxation in anonymous statements leaked to the press, although the negotiation remains ongoing. According to ministry sources, “the Fund claims that if the tax-free threshold is reduced considerably and is also granted to those with [annual] incomes above 40,000 euros, then we help the poor and not the rich! This original view […] makes it clear that the… traditional supporter of the planet’s poor, the Fund, is probably not negotiating with the seriousness required.”

Alternate Finance Minister Tryfon Alexiadis also raised some eyebrows in Parliament on Friday when he stated that “if I wanted to put a title to the taxation history of the country I would say: The ugly part is behind us, now the worst is coming.”