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Part II

Developments in the Member States

Current topics and prospects; policy orientation


A number of measures have been adopted since 2010 as a part of the broader fiscal consolidation effort linked to
the EU and IMF package of financial assistance. In particular, the PIT system was reformed with law 3842/2010,
and further modified in 2011, to increase its progressivity and abolish existing exemptions (see below). Moreover,
in July 2011 a new solidarity contribution was introduced on individuals, which applies to income earned in the
years from 2010 to 2014. The rates range from 1% for income above 12 000 to 4% above 100 000. The
contribution rate is 5% for high-ranking state officers. The tax law of March 2011 reduced the CIT rate to 20 % for
income earned in 2011 and abandoned the split system on retained and distributed profits introduced in 2010. The
extra contribution charged on large profitable corporations (at progressive rates, initially, of 5, 7 and 10% and since
2010, for income earned in 2009, at progressive rates of 4, 6, 8 and 10%) had been previously extended until 2014.
The highest revenue yield has materialised from the measures taken on indirect taxation. In February 2010 a
generalised increase in VAT rates was approved, with the standard rate raised by two points to 21 % and the
reduced rate increased from 9 % to 10 %. A further increase brought the standard and the reduced rate to 23 and
11 %, respectively, since July 2010. With effect from 1st January 2011, the reduced rate was increased to 13 %,
whereas the super-reduced rate was raised to 6.5 % and its applicability extended to hotel accommodation services.
Excise duties on cigarettes, alcohol and fuel, as well, have been increased repeatedly. Other new measures
introduced in 2011 include the move of some non-basic goods and services from the reduced to the standard VAT
rate, and a special real estate duty on residential property, calculated on the surface area of buildings, taking into
account also its age and location. The duty is collected through payment of electricity bills (52).

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The government has announced a comprehensive tax reform, to be enacted by end-June 2012, aimed at simplifying
the tax system and enhancing its growth-friendliness. The reform package will include a simplification of the main
tax codes, and of the VAT and property tax rate structures, the elimination of several tax exemptions and
preferential regimes under the corporate income tax and the VAT, and a more uniform treatment of individual
capital income.

Main features of the tax system


Personal income tax
The PIT system, overhauled in 2010, was further modified with laws 3986 and 4024 in 2011. There are now eight
tax brackets (replacing the previous four), with tax rates from 10 % to 45 % (applicable above 100 000) (53). In
2011 the basic tax-free threshold has been reduced to 5 000 (from 12 000). The application of the tax free
bracket, for income up to 60 000, is granted only to taxpayers submitting invoices for living expenses covering at
least 25 % of the taxable income. If the collected receipts do not cover this amount, a 10 % tax is levied on the
difference between the value of collected receipts and the required amount. The new unified scale applies to all
sources of income, thus eliminating the different treatment of employment income and pensions, and of other
income in place in the previous system.
There are no local income taxes. Greek law defines six categories of taxable income: income from immovable
property; income from movable property, i.e. investment income; from business; from agriculture; from
employment; and from professional activities and other sources. Income earned from renting land and buildings is
subject to an additional 1.5 % rate beyond the progressive income tax. In case of residential property, the rate rises
to 3 % where the surface area of the residence is greater than 300 m2. The amount of additional tax may not be
greater than the amount payable on the taxpayer's total net income. Law 3842/2010 abolished the capital gains tax
on gains from the sale of real estate, making transfer of real estate which is not subject to VAT taxable with a
transfer tax (see below).
There are no personal allowances. In 2003 previous tax deductions were transformed into tax credits. After the
reform with law 4024 of October 2011, credits are still granted for medical expenses, home rent, annual
educational expenses, for environment friendly interventions in buildings (including heating systems), for the
(52) The constitutionality of such duty has been challenged before the Council of State, and a decision is pending.
(53) On top of the headline rate, a solidarity contribution is applied (see Current topics and prospects; policy orientation). Bonuses paid to executives of credit institutions
above certain thresholds are taxed at higher rates, up to 90 %.

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Taxation trends in the European Union