Eliminations of tax exemptions and tax-free limits

Troika teams are arriving in Athens today to indicate where to make cuts and privatizations. By the end of the week Lucas Papademos must have prepared the draft bill for cuts in the public sector and benefits of at least 11.5 billion euros, so that immediately after the elections the next government will arrive at a new package for 2013-2014, as provided for in the memorandum.

Today also marks the start of the dialogue on the taxation system and the government will present measures that will be included in the new tax bill. The basis for these changes will be the IMF and EU proposals.

The new tax package being drafted by the Finance ministry is expected to add new burdens on households, as it will include:

1.    elimination of tax exemptions and special tax statuses. It provides for the elimination of tax deductions such as mortgage interest on first home, rent, tuition fees, insurance fees, medical visits, tests, hospital fees or insurance contributions

2.    reduction of tax brackets from 8 to 3 or 4, possibly accompanied by a reduction of the basic tax-free limit of 5,000 euros to 3,000 euros or its complete elimination

3.    adoption of single autonomous taxation at 20% on capital gains as income from rents

4.    simplification and unification of VAT rates, with IMF proposing the imposition of a uniform rate of 19%, 20% or 21% on all goods and services other than hotels and package tours that may be subject to a reduced rate of 9% or 11%

5.    unification of all taxes on real estate into just two

6.    changing of the method of calculating the objective values of the properties that will lead to their review

The Troika has no objection to cuts on taxes, but only to those that are not being collected… For every euro that will be lost from the new tax breaks, they want the State to collect at least one euro through another measure.

Reports, however, say that ND may not participate in the tax debate, apparently to appear – before or after the elections – not to be bound by its results.