Brussels upset over tax-free ceiling

Almost a million taxpayers have ended up on the losing side following the cancellation of the so-called countermeasures that were seen accompanying the now-scrapped reduction of the tax-free threshold, which according to a European Commission representative is problematic.

The Commission official said on Friday that “we are taking note of the fact that the bills have been sent to Parliament. The tax package agreed in 2017, which included the reduction of the tax-free ceiling and would have started applying as of January 2020, was planned to widen the tax base and create fiscal space for pro-growth reforms in the tax system.”

The same official added, “We remind that Greece has committed itself to keeping the targets and the main reforms activated over the course of the bailout program and to seeking further measures so as to strengthen the positive outlook of its economy and assist in achieving the fiscal targets in the long term.” The issue will likely come up in next week’s Eurogroup.

More than 437,000 taxpayers with annual incomes of over 24,000 euros – who cover 50 percent of taxes paid by individuals – stand to lose out from the scrapping of the countermeasures that came with the cancellation of the tax-free threshold reduction. The same applies to the entire category of self-employed professionals. This means that about 1 million taxpayers are affected by the government’s decision to rush to table its amendment in Parliament without the prior agreement of the country’s creditors.

The income of the middle classes has shrunk by about 50 percent as a result of the overtaxation introduced in recent years, and the countermeasures, voted into law in 2017 to come into force this coming January, would have offered them some relief. They included the abolition of the solidarity levy for annual incomes up to 30,000 euros and a reduction in the rates for higher incomes, as well as dropping the lowest income tax rate from 22 to 20 percent.

Still, if the tax-free limit was reduced and the voted countermeasures were to be implemented, there would be additional taxes inflicted on taxpayers with annual incomes of up to 20,000 euros and tax cuts of between 176 and 701 per year for taxpayers with annual incomes over 25,000 euros.