Swing in favor of salary workers
The government is turning its attention this year to easing the burden on salaried labor. It is keeping some measures under wraps for the time being.
Plans include accelerating the abolition of the solidarity levy while bringing forward the reduction of social security contributions, thereby reducing the costs for salary workers and enterprises alike. Therefore, instead of reducing the corporate tax from 24 percent to 20 percent this year, the government is now mulling the earlier reduction of contributions that employers and employees pay.
Prime Minister Kyriakos Mitsotakis said during an interview on Alpha TV on Thursday night that “taxation on salaried labor remains high. We shall weigh whether we require an additional reduction in the contributions of workers. The capacity for the reduction of the solidarity levy will stem from the performance of the economy and the reduction of primary budget surpluses.”
In effect, this constitutes a government swing toward supporting salary workers and middle income earners in general, as until recently both recommendations and decisions favored freelance professionals instead. The premier has apparently rejected proposals for a drastic reduction of the fee for practicing a profession – known in Greek as “telos epitidevmatos” – as it was deemed that financial policy should focus on salaried labor, the middle classes and enterprises.
This has led to the decision for the reduction of social security contributions by 0.9 percentage points in 2020, which translates into the easing of non-salary costs by 2.21 percent. The measure will concern some 1.5 million full-time employees. It will be followed by a one percentage point reduction in 2021.
The government’s plans now provide for a reduction of the solidarity levy this year and its complete abolition in 2021. The fiscal cost for that, according to a senior Finance Ministry official, exceeds 1.2 billion euros, but – especially for 2021 – the abolition will be the fruit of negotiations with the creditors and the reduction of the primary surplus target by one percentage point of gross domestic product from 3.5 to 2.5 percent of GDP.
