Benefits for high earners and working parents with middle incomes, but also injustices for low-income pensioners and employees with low wages, finds the Economic and Social Committee in its opinion on the measures from the Thessaloniki International Fair, regarding the new tax system.
New tax system: Who benefits and who is disadvantaged
According to the Economic and Social Committee, the reductions in tax rates for wages, pensions and income from business activities mainly benefit these specific groups, but are not sufficient to cover the real burden shouldered in the past by those with annual incomes up to €10,000.
At the same time, despite the increase in nominal incomes due to inflation, there was no corresponding indexation of tax brackets, resulting in the tax burden for households with lower incomes remaining disproportionately high.
Specifically:
- It emphasizes that the relief that will result from the bill’s measures for taxpayers who are paid wages or pensions at the level of minimum wage is minimal, given that the low tax bracket for incomes up to €10,000 per year is not modified and the logic of skyrocketing tax burden in the immediately following income bracket of €10,000 to €20,000 remains, even if the tax rate in this bracket is reduced by two percentage points.
- It notes that no relief results for workers over 25 years old or pensioners whose annual incomes from work or pension do not exceed €10,000 annually. Especially for workers over 25, not all those who work part-time or are employed for a short period during the financial year are relieved. Taking into account that a large number of mothers with minor children choose to work part-time for a long period, it is considered that relief measures should be adopted for this category of workers as well.
- It argues that the expected increase in minimum wage thresholds in 2026 will further limit the benefit from reducing tax rates, due to the rise of many incomes above the €10,000 threshold, where the tax rate, despite its reduction by 2 percentage points from 22% to 20%, will continue to be significantly increased compared to the 9% rate that continues to apply up to €10,000.
- It emphasizes that the choice not to index the tax scale following long-term inflationary pressure, as well as maintaining high indirect tax rates, has significantly reduced the real value of incomes, with negative consequences being heavier for economically weaker population groups. Consequently, «the need for further improvements in the tax scale remains, especially for brackets corresponding to low incomes».
The self-employed
According to the Economic and Social Committee, even smaller is the relief for freelancers who are taxed after presumptive determination of taxable income. It explains that this happens because the time of first application of the new lower tax rates is placed in the second half of 2027, following the application of the new increased minimum wage and with forecasts for inflation development promising further shrinkage of the purchasing power of the households to which they belong.
Additionally, considering all parameters for determining presumptive taxable income for freelancers as well as the time of first application of the new rates (2027 tax declaration), it is judged that the reduction of tax rates will have limited benefit, or will simply temporarily stabilize their tax burden for hypothetical incomes.
VAT and property tax
The Committee, referring to the provision for reducing VAT rates by 30% on Aegean islands with populations up to 20,000 inhabitants, points out that «questions arise about the distinct treatment of Aegean islands, depending on population and the geographical unit to which they belong», while commenting on the provision for reducing and subsequently abolishing property tax on primary residences in small settlements, it states that there are also questions «about the criteria on which the more favorable tax treatment of settlements with populations up to 1,500 inhabitants is preferred over other larger settlements in terms of population, regardless of the specific economic characteristics that these settlements may have».
Living standards presumptions
Furthermore:
- It characterizes as positive the horizontal reduction of living standards presumptions, although – as it emphasizes – «it does not remove the irrationality of taxing hypothetical incomes, an irrationality that also applies to the presumptive determination of taxable income for freelancers», while:
- It notes that the proposed intermediate taxation brackets for rental income are moving in the right direction, as the current taxation brackets skyrocket excessively from a certain income level onwards.
