Greece Passes New Tax Code

April 16, 2010 Taxation in Greece

George PapandreouThe Parliament of Greece has approved an extensive overhaul of the country’s tax code, in a concentrated effort to revive national finances and stem tax evasion.

On April 15th the Greek Parliament approved a controversial and widely discussed new tax code aimed at reforming the country’s taxation landscape. Filippos Sahinidis, Deputy Finance Minister of Greece, described the aim of the new bill, saying, “This is an important piece of legislation to deal with the major problem of tax evasion and other chronic problems for tax revenues.”

Under the new laws, personal income taxation will see a significant overhaul. Preferential tax treatment previously enjoyed by several industries have now been re-appealed, and replaced with the standard tax brackets. A new marginal top-rate will be introduced on incomes above EUR 100 000. The current top rate of 40 percent will apply to incomes between EUR 60 000 and EUR 99 999. Dividends received by individuals will not be taxed separately, but added to accumulated personal income and taxed at an appropriate rate. The new tax brackets will be also coupled with stricter punishments for tax fraud and avoidance, in a hope of eliminating the estimated EUR 15 billion of tax evasion seen in Greece annually. Explaining the new attitude, George Papandreou, Prime Minister of Greece, simply said, “From now on no asylum from tax evasion. Punishment will be exemplary.”

Corporate income taxes will be reduced gradually over the next five years from the current 25 percent to 20 percent. Pay bonuses given out in banks and financial firms will now be subjected to a 90 percent tax rate. Individuals and business entities which provide authorities with information on public sector corruption are promised tax amnesty under the new bill, and monetary rewards could be granted in the case of a successful prosecution.

The entire bill has been subject to strong public and political controversy, with many still unsure as to its benefits. According to opposition parties, the new levels of taxation will only serve to further weaken Greece’s already struggling economy. Several industries, especially taxi drivers and lawyers, have already gone on strike in opposition to re-appeals of their industry’s preferential tax treatment.

Photo by Parti socialiste