ATHENS – A promised 50 percent cut in the hated, so-called “Solidarity Tax,” will reportedly be only 30 percent as Greece fears a backlash from its international lenders.
The government is backing away from a promise by Prime Minister and New Democracy Conservative leader Antonis Samaras to halve the tax, believing it would not get the okay from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) that has put up 240 billion euros ($317 billion) in two bailouts.
The Troika demanded, and got, harsh austerity measures in return, including higher taxes almost across the board, along with pay cuts, slashed pensions and worker firings.
Seeking to ease the sting and get a boost after his party fell behind the major opposition Coalition of the Radical Left (SYRIZA), Samaras proposed a series of tax breaks.
According to ministry officials, the creditor representatives have not yet given their consent for the reduction of the solidarity tax, which constitutes a levy ranging from 1 to 4 percent of taxpayers’ annual incomes. The government will try to sway the Troika’s opinion during negotiations set to start later this month.
Kathimerini said that the ministry plans to argue that considering the solidarity levy contributed some 1.4 billion euros to the budget in 2013, a 30 percent reduction would bring revenues to about 1 billion euros and help plug a hole in the 2015 budget.
The solidarity tax was not supposed to continue into next year as it was an extraordinary measure, although it was also supposed to be for one year only when it was implemented in 2011.
Greece’s creditors say that the fiscal gap next year will come to 2 billion euros, but this figure is based on the supposition that there wouldn’t be a solidarity tax.
Given that the takings of the tax are divided between the year they are collected and the next, the 30 percent discount on the levy would add some 500 million euros to 2015 revenues.
The same ministry officials argue that you can’t just throw away the chance to collect revenues of 1.4 billion euros within a year or two. Such moves must be implemented gradually, they say, and replaced by revenues from other sources, such as broadening the tax base without any new measures, combating tax evasion and creating a tax model that will remain fixed for years to come.
They add that the new changes announced by Samaras concerning the extension of the installments for the single property tax (ENFIA) and for the repayment of expired debts will create problems in this year’s budget as well as to that of 2015, leading to a temporary drop in revenues from the above sources.
The plan is for taxpayers in the annual income bracket of 12,000 to 20,000 euros to pay 0.7 percent of their income as solidarity tax next year (from 1 percent in 2014), for incomes of 20,000-50,000 euros to pay 1.4 percent (from 2 percent), for those earning 50,000 to 100,000 euros to pay 2.1 percent (from 3 percent) and for people earning over 100,000 to pay 2.8 percent (against 4 percent today).