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  • Mammoth budget cuts, incremental tax cuts in omnibus bill

    Planned tax breaks include a 700mn euro tax cuts package for businesses, and the tax rate on profits will be reduced from 29 percent to 26 percent.

    ΤοΒΗΜΑ Team
    The government is entering the last stretch towards completion of the bailout programme with an omnibus bill that provides for huge budget cuts, including a 5.1bn euro cut in pensions (in 2019), and a lowering of the tax-free threshold (in 2020), along with measured benefits to the lower income brackets and tax breaks for businesses.

    The bill, covering all the prior actions needed to complete the bailout evaluation, was tabled in parliament on Friday, along with the medium-term stabilisation programme, through 2022. It will come to a vote on 14 June.

    Completion of all the prior actions opens the way for the 21 June Eurogroup to approve an 11bn euro loan tranche and also debt relief measures.

    Major adjustment

    The commitments and heavy measures in the medium-term programme are part of a fiscal adjustment, designed to produce primary surpluses of over 3.5 percent of GDP through 2022, which relies primarily on 3.2bn euros in pension cuts in 2019.

    In order to temper the impact of the harsh measures and reduce the political cost, the government plans a series of tax breaks, which the creditors have approved.

    Planned tax breaks include a 700mn euro tax cuts package for businesses, and the tax rate on profits will be reduced from 29 percent to 26 percent.

    An additional 435mn euros in tax cuts is planned for 2020. Of that, 209mn euros are earmarked for cuts in the ENFIA real estate tax for targeted groups of property owners.

    Another 81mn euros will be spent on reducing the insurance contributions of freelance professionals, while 145mn euros will be spent on social welfare spending (school meals and child care centres).

    In 2021, there will be a reduction in the highest income tax rate and cuts in the extraordinary social solidarity contribution.

    The reduction in the highest income tax bracket for individual taxpayers will lead to 877mn euros in tax breaks for 2020, and 997mn euros in tax breaks for 2021 and 2022.

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