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The new tax system delays economic growth

15 December 2012 / 18:12:16  GRReporter
4898 reads

The new tax law is socially unjust and it will slow economic growth. It burdens not only companies' profits, intended for investors, but imposes an additional burden on all taxpayers, with no exceptions. Even incomes of families with three children will be reduced as of January, if their family income exceeds 10,000 euro per year.

The main task of the government is to attract investments because liquidity cannot be covered even by the greatest tranche of 34 billion euro, and the Greek economy needs "injections" which can only come from investments. They will give new impetus to production and new jobs will be created.

Economic management of the state, however, ignores market problems and those of companies which, despite the fall, have managed to keep afloat during the crisis. Now, it will resort to an increase in the rate of tax on profits from 20% to 26%. Meanwhile, Greece's neighbouring countries have effective tax laws, making them attractive places for foreign investors. The only instance when the tax burden on businesses will not increase is the distribution of dividends, where the tax rate is raised to 26%, but dividends will be taxed at a rate of 10%, not at the current 25%.

The provisions of the new law will increase the tax on profits of general partnerships and limited liability companies with simple accounting. In these cases, the tax will be increased from 20% to 26% for the first 50,000 euro of net income and to 33% for amounts of over 50,000 euro.

Expenses for which tax cuts will apply under the new tax law are as follows:

1. Expenses for medical and hospital care of the taxpayer, as well as of other related people, which are not covered by insurance funds or insurance companies, and amount to more than 5% of taxable income. The amount of the reduction cannot exceed 3,000 euro.

Expenses for medical and hospital care are considered to be the following:

- Payment to doctors of all specialties and medical centres, medical examinations and visits, as well as payment to dentists, orthodontists and surgeons to treat teeth, dentures and maxillofacial surgery.

- Expenses for treatment in hospitals or private clinics and long-term coverage of costs of health care needs

- Expenses for pharmaceutical care

- Payment for nursing care during hospital stay or at home.

- Expenses for replacement of body organs with artificial ones or purchase and transplantation into the patient's body of organs that are necessary for the functioning of the body

- Expenses for hospital care for children with special needs with more than 40% disability, certified by the appropriate Commission, if their annual income does not exceed 6,000 euro, as well as expenses for tuition fees and maintenance of these children in special schools and hospitals.

- Expenses amounting to 50% of the costs for legal hospices for the elderly

These costs include medical and hospital care expenses for those who live with the taxpayer and have over 67% verified disability, with an annual income of more than 6,000 euro. In this case, the reduction applies to hospital and medical care expenses exceeding the total annual net taxed income of such people. Support money after a divorce is also included, when the parent does not live with the child. The amount of costs in this case, which is calculated collectively for both parents, reduces tax only if it is included in the tax return and is divided between the spouses according to the amount of their income.

2. The amount of alimony to be paid by one spouse to the other, to whom it is a taxable income. The percentage reduction of tax cannot exceed 1,500 euro.

3. Money donations to:

- Institutions of the government, the National Fund for Social Solidarity, churches, monasteries on Mount Athos, the Oecumenical Patriarchate in Istanbul, Patriarchates of Alexandria and Jerusalem, the Sinai Monastery, the Orthodox Church of Albania, municipal hospitals, private hospitals funded by the state

- Charities and organisations providing educational services and scholarships to private entities, and the constitutional compatriots, founded for charity purposes, research and technology organisations, non-profit research centres of Greeks of the Diaspora

- Non-profit organisations of Greeks of the Diaspora, which are private entities and were founded with cultural goals - education and dissemination of literature, music, dance, theatre, cinema, art, sculpture, and the creation and maintenance of recognised private art museums, museums of natural history, ethnography

4. Expenses for medical equipment and ambulances which are transferred as a donation to state and municipal hospitals and private hospitals funded by the government.

The total amount of donations and sponsorships for which the reduction will apply may not exceed 5% of the total taxable income. The reduction will apply if the amount of donations exceeds 100 euro. No other reductions should have been applied on these amounts under another provision.

As of next month, the majority of persons employed under a labour contract and pensioners, even those with children, will be levied from 3% to 185% more. The monthly income of families with children will decrease significantly if their income exceeds the annual base of 10,000 euro, and if they have no children, because of the new coefficient, reduction starts from 23,000 and above.

Changed provisions in the new tax law with regard to the tax scale and the removal of non-taxable minimum for children will result in increased monthly deductions for those who:

- have an annual income of more than 23,000 euro and have no children

- have an annual income of more than 12,000 euro and have one child

Tags: taxes tax scale coefficient reduction incomes
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