Greece Legislates Tax And Pension Reforms

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Greek lawmakers approved new tax and pension reforms, a move the left-led government hopes will help unlock fresh bailout funds under a financial lifeline worth up to 86 billion euros extended to Athens last year. Key points of the reforms:

PENSIONS: Introduces unified retirement rules and a national pension at 384 euros, cuts supplementary pensions, plans to gradually phase out a top-up stipend for pensioners now on lower incomes and recalculate pensions. It also tightens rules on widower or legacy pensions and readjusts replacement rates to curb early retirement.

SOCIAL SECURITY: Sets social security contributions at 20% of employees’ net monthly income – with 13.3% burdening employers and 6.7% employees.

INCOME TAX: Lowers the income tax-free threshold, or personal allowance, to an average of around 8,800 euros a year from around 9,500; makes income bands narrower, increases tax coefficients. Lowest tax band is now 22% on a gross income of 20,000 a year compared to 22% for 25,000 euros which existed previously.

The upper tax band, of 45%, is now imposed on gross incomes exceeding 40,000 as opposed to 42% on income above 42,000 under the previous arrangement.

SOLIDARITY LEVY: First introduced in 2012, rationale was to assist Greece’s army of unemployed. The levy on net incomes ranges from the lowest 2.2% on incomes from 12,000 to 20,000 a year, to 5.0% up to 30,000, and 6.5% up to 40,000. The highest band is 10% on incomes above 220,000.

DIVIDENDS TAX: Increases to 15% from 10%.

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