Greece Releases Draft 2016 Budget
The Greek Government has tabled the nation’s 2016 Budget, which includes measures agreed as part of the recently negotiated third bailout.
A statement released by the Finance Ministry was vague about the measures proposed. However, it said that authorities will reform the VAT code, amend social security rates, raise corporate tax rates and require more advance tax from freelancers, and look to increase revenues from property taxes.
In addition, the Government previously said it would raise the VAT rate on private education to 23 percent and it intends to redouble its efforts to tackle tax evasion, including through the introduction of an assets register announced earlier this year.
Recently, Greece has reformed the VAT regime, including by removing some tax preferences for the islands; 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.
Previously, as part of the bailout talks, Greece made the following commitments in August:
- In the agriculture sector, Greece will 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).
- Greece was required to adopt, by September 2015, outstanding reforms on the tax procedures codes, including introducing a new Criminal Law on Tax Evasion and Fraud; issuing a circular on fines; and increasing enforcement concerning the non-issuance or incorrect issuance of retail receipts for VAT purposes.
- The Government has said that in October 2015 it would 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.
Greece also set out fiscal reform goals for the longer term. By March 2016, it intends to have simplified VAT legislation, which will be aligned with the tax procedure code and will eliminate outstanding loopholes and shorten the VAT payment period. The income tax regime will be simplified, and the corporate tax law will be modernized, particularly in respect of provisions covering mergers and acquisitions and corporate reserve accounts. Finally, new income tax code provisions will be added covering cross-border transactions and transfer pricing.
In the area of property tax, Greece has committed to review property tax rates in 2016 and align property assessment values with market prices with effect from January 2017. Greece recently said it would reform its property tax and indicated that it will seek to install a broader levy that would tax Greek taxpayers’ homes abroad.