Greece’s Third Bailout Measures Agreed
Greek lawmakers and European Union finance ministers have signed off on a third bailout deal, including a diverse range of tax increases and commitments to curtail spending.
A memorandum between the two parties, released on the blog of the former finance minister Yanis Varoufakis, acknowledges that the Government has recently adopted a reform of VAT and a first phase of the reform of the pension systems; raised the corporate tax rate; extended the implementation of the luxury tax; taken measures to increase the advance corporate income tax in 2015 and require 100 percent advance payments gradually for partnerships, etc., and individual business income tax by 2017; and raised the solidarity surcharge.
In the agriculture sector, the new package of measures will require Greece to gradually abolish the refund of excise tax on diesel oil for farmers in two equal steps in October 2015 and October 2016; and phase out the preferential tax treatment of farmers in the income tax code, with rates set at 20 percent in 2016 and 26 percent in 2017.
Greece will also be required to phase out special tax treatments for the shipping industry. The tonnage duty rate will be increased by four percent during the years 2016 to 2020.
A tax will be introduced on television advertisements and Greece will extend Gross Gaming Revenues (GGR) taxation, at a rate of 30 percent, on video lottery terminal games. Greece will increase the tax rate on income from rents for annual incomes below EUR12,000 (USD13,250) to 15 percent (from 11 percent) and for annual incomes above EUR12,000 to 35 percent (from 33 percent).
By September 2015, Greece will be required to adopt outstanding reforms on the tax procedures codes, including introducing a new Criminal Law on Tax Evasion and Fraud; issue a circular on fines; and increase enforcement concerning the non-issuance or incorrect issuance of retail receipts for VAT purposes.
By October 2015, the Government will be required to simplify the personal income tax credit schedule; re-design and integrate into the income tax code the solidarity surcharge for income as of 2016 to more effectively achieve “progressivity” in the income tax system; and identify all business income tax incentives and integrate the tax exemptions into the income tax code, eliminating those deemed inefficient or inequitable. The Government will also be required to ensure the revenue administration can access taxpayers’ premises to conduct timely audits.
By March 2016, Greece will be required to codify and simplify the VAT legislation, aligning it with the tax procedure code, eliminating outstanding loopholes and shortening the VAT payment period; simplify the income tax regime and ensure consistency of the income base for income tax and social security contributions of small businesses below the VAT registration threshold; and modernize the corporate tax law in the income tax code covering mergers and acquisitions and corporate reserve accounts and implement income tax code provisions concerning cross-border transactions and transfer pricing.
In the area of property tax, Greece will be required to review property tax rates in 2016 and align property assessment values with market prices with effect from January 2017.