Tuesday, 11 December 2012

Imagine the top rate of tax starting at £21,000. For Greece, it's a reality


Britain wasn’t the only country to have an autumn financial statement. The Greeks had that pleasure too. In their case it was a new tax law, which their finance minister has helpfully explained in an interview with the Greek paper Kathimerini.
In it, Yiannis Stournaras, the aforementioned minister, explains exactly how powerless the Greek state has become since it accepted the bailouts and rule by the troika of the IMF, European Central Bank and European Commission.
This is what happens when you choose government from Brussels over independence. It is a chastening tale of the value of freedom over Brussels-gifted sticking-plasters:

The proposal we made to the troika to simplify the tax system, which until now had eight brackets, was to create three brackets: 21 per cent for up to 25,000 euros, 36  per cent for 25,000 to 48,000 and 45 per cent for 48,000 and above. That's the proposal we gave to the parties. The troika agreed but calculations we made showed that the tax for some incomes on the borderline of brackets was very high, so they proposed a similar scheme where a 45 per cent bracket for incomes over 26,000 would be introduced but with a tax discount of 1,950 euros for everyone.
The initial proposal from the Greek government was rather strong and uncharacteristically hard on taxpayers but does at least show that they do recognise that they must tackle their debt after all.
In sterling, the Greek government’s proposal was: 21 per cent for anybody earnings up to £20,154; 36 per cent for anybody earning between £20,154 and £38,696; and 45 per cent for earnings over £38,696.
But the troika responded, and they are not pleased. The Greek national government’s proposals were deemed to be far from good enough; they imposed their own demands, including a 45 per cent tax on all earnings over £20,960. They do, of course, offer a sweetener; everybody is to be given an additional £1,572 on top of the current tax free allowance.
This is a shocking rate of tax by anyone’s standards, and amounts to anybody taking home over £403 a week hitting the 45 per cent tax bracket.
At the present rates those earning £48,000 are on 40 per cent and the 45 per cent rate kicks in at £80,000. This is a massive change that will undoubtedly lead to the most immense of social reactions.
It is an absolute outrage. Of course Greece must pay its way, and the proposals from the Greek coalition (which include getting rid of child benefit, in their case tax breaks, in its entirety) are trying to deal with their colossal tax evasion problem, but their revenue raising capacity has already been hit by the draconian demands of the Troika.
Last year tax was increased through VAT rises on restaurants and increased taxes on cigarettes; the minister understands that these policies have probably done more harm than good, while only encouraging the black market but he is, of course, powerless to resist: “We tried to negotiate a reduction with the troika but they would not accept it.”
When it comes to business taxes they are raising corporation tax from 20 per cent to 26 per cent under troika demands which will undermine any growth in the business sector. Keep in mind this is being done to bail out not Greece but the creditor banks in Germany and France. The Greek people will see nary a bean.
Already the government are recoiling from the plans, but without them there will be no Christmas gift from Brussels.
Of course there is another option. Greece could leave the eurozone. It could find its own level, devalue and regain competitiveness. It wouldn’t be easy but it would have a chance. Today it has none.
I feel for Mr Stournaras. The interview makes horrific, pathetic reading for anybody who believes in national democracy.

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