Greek Lawmakers Introduce Income Tax Bill ; Legislation to Raise Rates Aims to Satisfy Creditors' Demands for Reform

Article excerpt

The legislation, which has incited protest, looks to raise $3.28 billion from middle-income families, self-employed professionals and farmers.

Just a few hours after gaining approval for crucial rescue loans to avoid a messy default, the Greek authorities presented a new tax code late Thursday that would increase taxes on middle- to high- income families, self-employed professionals and farmers.

The bill, which was part of the conditions Greece agreed to with international lenders, drew a hostile reaction from austerity-weary Greeks before and after it was submitted in Parliament late Thursday. It will be discussed by lawmakers before a vote, which will most likely take place after Christmas, a Finance Ministry official said.

The legislation is expected to be approved as the objections raised by junior partners in the fragile coalition of Prime Minister Antonis Samaras have been to details of the plan rather than to its general thrust.

The government hopes to raise EUR 2.5 billion, or $3.3 billion, by increasing the income tax rate on those earning more than EUR 20,000 a year. It will also trim tax benefits attributable to having children and revoke tax breaks for farmers.

The plan would also increase the amount of income tax paid by about a million self-employed professionals like doctors and plumbers -- more than one-third of the country's work force. Members of this group are widely perceived as not paying their fair share by, among other things, understating their income so that it falls below a tax-exempt threshold. Under the new rules, the threshold would be abolished and the self-employed would be taxed from the first euro they earn.

The bill also raises the tax on corporate profits to 26 percent from 20 percent, while lowering the tax that companies pay on distributed dividends to 10 percent from 25 percent.

"The proposed legislation is part of wider plans to create a just and effective tax system, reorganize the tax collection mechanism and apply a stricter framework against tax evasion," the Finance Ministry said in a statement accompanying the 74-page bill.

The tax bill, dubbed the "mini tax reform" by Finance Minister Yannis Stournaras, is the first of two tax overhauls. The mini bill is part of Greece's commitments to creditors to save EUR 13.5 billion over the next two years, through austerity measures and tax hikes, to reduce the country's budget deficit and make debt sustainable.

Early next year, the government plans to introduce a more thorough overhaul of the tax system, introducing immediate jail sentences for large-scale tax evaders rather than the suspended terms currently given.

In return for the promised measures, Greece's creditors agreed during the past week to release EUR 50 billion in funds to help Greece avoid default through the winter.

The E. …