Petsas Hails “Tax Revolution” as Greece Cuts Rates for Incomes up to €20,000

Athens is rolling out one of its most sweeping tax shifts in over a decade, as Prime Minister Kyriakos Mitsotakis’ government announces single-digit tax rates for annual incomes up to €20,000. Ruling New Democracy MP Stelios Petsas described the measure as a “tax revolution”, stressing that it targets nearly 80% of taxpayers—mainly the middle class and younger workers.

Fiscal Balance

Since 2019, the government has pushed through 72 tax reductions. According to Petsas, the latest package is fiscally sustainable:“We can lower tax rates without losing revenue.”

Key changes include major cuts in VAT on the islands:

• The 24% VAT rate will be reduced by 8 percentage points.
• The 13% rate will drop into the single digits.

A blanket 30% VAT reduction is ruled out, with Petsas warning it would cost €7.5 billion in lost revenue.

Opposition: Indexation and VAT

PASOK leader Nikos Androulakis is calling for indexation of tax brackets to inflation, to protect real incomes. The finance ministry estimates the measure would cost €400 million, while the government argues it is already spending €1.7 billion on tax relief.

Petsas countered that indexation would create instability:“Stability beats indexation. What matters is trust in the system.”

Signal to Markets

The tax cuts are part of a broader strategy to boost household disposable income while strengthening investor confidence after Greece regained its investment-grade rating.

Greek 10-year bonds are trading at around 3.5%, roughly 150 basis points above German bunds. Maintaining tight spreads is seen as crucial to debt sustainability.

Eurozone Comparisons

• In Ireland, the top income tax rate is 40%, offset by a corporate rate of 12.5%.
• In Portugal, incomes around €30,000 face rates close to 20%, nearly double Greece’s new regime.
• In Italy, middle-class earners are taxed at starting rates of 23%.

Athens is positioning itself closer to tax-friendly EU economies, aiming to lure investment and curb tax evasion.

Market-Centric Analysis

Analysts say the government’s tax strategy could have a dual effect:

• GDP: Consumption—over 65% of Greek GDP—could be boosted by 0.5–0.7 percentage points in 2025 if relief quickly reaches households.
• Inflation: Targeted VAT cuts may trim prices by 0.2–0.3 points, though the ECB remains wary of secondary effects.
• Public Debt: Greece targets a primary surplus of 2% of GDP, seen as sufficient to keep debt on a declining path toward 150% of GDP by 2027.
• Investment: The government hopes to combine tax incentives with €31 billion in Recovery Fund resources to lift FDI, which stood at just 3% of GDP in 2023—below the Eurozone average.

The next test will be whether global investors are convinced that tax relief won’t derail fiscal stability. Markets will watch budget execution and growth forecasts closely.

Wrapping up his remarks, Stelios Petsas distilled the government’s philosophy into a single message:“Greece needs a stable and low tax framework—one that supports citizens, strengthens the economy, and sends a signal of trust to markets.”

With this stance, the ND lawmaker frames the tax shift not just as social relief, but as a strategic tool for investment credibility.

Source: pagenews.gr