Greek Tax Trap: overtaxing even zero-euro income with ‘deemed income criteria’

Posted by keeptalkinggreece in Economy, Society

A shock is awaiting 2,400,000 Greek taxpayers with annual real income between zero and 5,000 euro. This year, they will have to pay tax even if they have no income at all. The tax law applied this year for the income of 2012, will be based on so-called “deem income criteria.” According to this Troika-imposed austerity measure, regardless of the actual income, every taxpayer is “charged” with a presumptive income of minimum 3,000 euro – for married couples 5,000- per year to cover living needs. In addition, another “presumptive income” is calculated by the tax authorities, if the taxpayer owns the home he lives in. Greek finance ministry will tax it presuming the owner needs several hundred euro per year for maintenance.
Daily Eleftheros Typos published on Saturday several examples of the injustice of this measure:

A pensioner had an annual income 4,800 euro in 2012. He lives alone in his home of 80 square meter in an area with objective value below 2,800 euro per sq.m.
Based on the income tax bracket the income of 4,800 euro is tax-free as the lower taxable cap is 5,000 euro.
when he will fill his income declaration this year though, he will have to add:
-3,000 euro for minimum living presumption and
-3,200 euro (40 euro/sq. m.) as residence maintenance presumption.
Based on these two ‘deemed income’ criteria, the tax office will calculate, the man has to have an income of 6,200 euro.
The pensioner will be charged with income tax of 10% for the amount of 1,200 euro (6,200 deemed income -5,000 tax-free threshold = 1,200 euro.). The pensioner will have to pay 120 euro even if the tax law officially grants him 5,000 euro are tax-free.
If this man has the luxury of owning a car, additional ‘deemed income’ will be added for vehicle maintenance cost.

Vehicle annual cost
Deemed criteria for vehicles:
Vehicles up to 1200 cc no older than 5 years are calculated by the tax office to have annual maintenance cost 4,000 euro.  If aged 5-10 years, tax authorities calculate 4,000 euro minus 30% and for vehicles older than 10 years, 4,000 euro minus 50%.
If the above mentioned pensioner has a 15-year old car of 1200 cc, another 2,000 euro will be added on his deemed income, even if he cannot afford to drive around more than once per month.
Collecting Receipts

Apart from the unjust taxing an income which is not real, another trap may grab the taxpayer. this of collected receipts
Taxpayers are obliged to submit to tax offices receipts for expenditure equal 25% of the deemed income. That is for 6,200 euro deemed income, the tax payer has to submit receipt worth 1,550 euro – and not worth 1,200 euro, i.e. 25% of the real income of 4,800 euro.
the taxpayer will be called to pay another 10% tax for the missing receipts amount.
Interests from deposits
Supposedly the pensioner has 720 euro annual income from interests of his bank deposit. He uses this money to come up with his monthly needs, then 4,800 euro actual income means no more than 400 euro per month.
This 720 euro will have to be added to income declaration.
Many friends are now puzzled whether returns from deposits interest will be taxed – even though they are directly taxed and the depositor receives interest minus 10% tax (15% as of 1.1.2013)
Conclusion
While there is an official ‘tax-free’ threshold, the tax law makes it null with the ‘deemed income criteria’.
deemed income criteria will multiply the real income and could even double it by occasion.
Equally, long-term unemployed will have to pay taxes as the minimum ‘deemed income” will calculate 6,200 euro even if they have zero income.
While the low incomers and unemployed will be called to pay taxes for the income they don’t have, the members of the Parliament still create ridiculous circus performances every time they meet to deal with the whereabouts of the infamous Lagarde-List with the names of more than 2,000 potential big scale tax evaders. Yes, those who had their money in HSBC in Geneva, Switzerland.
PS No tax office will accept that one is borrowing money from relatives and friends to come along and cover basic needs in the fifth year of Greek recession and austerity.