The Greek parliament has approved a series of unpopular tax hikes to increase government income, one of the main conditions to qualify for continued aid from its foreign lenders.
In a sitting that ran into the early hours yesterday, a comfortable majority of lawmakers voted for the legislation, which the opposition said was another assault on Greece’s struggling middle class.
On key articles of the bill, 163 of parliament’s 300 members voted in favor.
The legislation scraps many tax exemptions, raises tax rates on property and corporate profits, and slaps a capital gains tax on share sales, in the hope of generating about 2.5 billion euros (US$3.3 billion) of additional revenue this year and next year.
“It is a bill of fiscal necessity and responsibility, required for us to get our next bailout tranche,” Greek Minister of Finance Yannis Stournaras told lawmakers.
The tax reform is part of an overall 13.5 billion euro austerity package that Athens passed in November last year to qualify for further bailout funds from its EU and IMF lenders and avert bankruptcy.
Passing the bill in parliament was one of the conditions Athens had to fulfill to get 14.7 billion euros in additional rescue loans by the end of March on top of a 34.3 billion euro sum the lenders unlocked last month.
However, the reform is expected to increase the squeeze on austerity-hit household budgets and weigh on an economy entering its sixth consecutive year of recession.
The economy is expected to contract by 4.5 percent this year.
Opposition lawmakers attacked the bill as yet another attempt by the government to punish the long-suffering middle class instead of pursuing tax evaders and the wealthy.
“This is a bill that puts into action a plan of destitution. 700,000 Greeks can’t pay their electricity bills, there are 3 million poor people in our country and 57 percent of our youth is unemployed,” said Panos Kammenos, head of the anti-bailout Independent Greeks party.
The legislation raises the tax rate on corporate profits to 26 percent from 20 percent, but lowers the tax on distributed dividends to 10 percent from 25 percent.
Capital gains from trading on the Athens stock exchange will be subject to a 20 percent tax from July this year, while interest income from bank deposits will be taxed at 15 percent versus 10 percent currently.
The bill reduces the number of tax brackets to three from eight, imposing a 42 percent top rate on annual incomes above 42,000 euros. Previously, a 40 percent tax rate applied to those earning over 60,000 euros a year while incomes over 100,000 were taxed at 45 percent.
Wage earners and pensioners earning up to 25,000 euros a year will be taxed at 22 percent, while incomes between 25,000 and 42,000 euros will be taxed at 32 percent.
The tax reform also does away with many tax exemptions, including part of the interest paid on home loans and insurance. However, it includes a 2,100 euro tax credit for those earning up to 21,000 euros a year.