Greece
Outlaws Cash Transactions Above 1500 Euros, Unveils New Taxes by Mike "Mish"
Shedlock
In
an attempt to rein in the shadow economy and collect more
tax revenue, Greece outlaws cash transactions greater than
1500 Euros. Please consider Greek Finance Minister unveils
tax reform, wage policy.
"From 1. Jan. 2011, every
transaction above 1,500 euros between natural persons and
businesses, or between businesses, will not be considered
legal if it is done in cash. Transactions will have to be
done through debit or credit cards"
"There's tax relief for incomes up to
40,000 (euros)"
"Taxable income based on the new scales
will include capital gains from the short-term trading of
stocks"
"Deposits in banks outside Greece are
exempted from audits of their origin if they are repatriated
within six months of the passing of the tax bill and are
taxed with a 5 percent rate"
"Wages of board members in unlisted state
companies will fall by 50 percent"
"The budget bill for allowances and compensations
will be cut by 10 percent"
Buy It Now
Everyone in Greece will quickly figure out that the time
to make major purchases is now. So expect to see sales plunge
starting January 1, 2011 as demand for everything priced above
1500 euros shifts forward.
New 40% Tax Rate
In addition, attempts to collect more sales taxes (VAT),
Greece to levy 40% tax rate on more earners.
Greece will lower the current
75,000 euro income threshold that is subject to a 40 percent
tax rate as part of reforms to urgently boost government
revenues, the country's finance minister said on Monday.
"The 40 percent tax rate will be applied
on income levels that are lower than what is the case today,
but there will also be intermediate rates that will provide
relief for low and middle incomes," Finance Minister
George Papaconstantinou told Ta Nea newspaper in an interview.
He said that as a result of the tax changes,
the biggest burden would be felt by a small percentage of
tax payers as 95 percent of earners report incomes below
30,000 euros a year.
Retirement Age, Fuel
Taxes Rise
Please consider Greece raises retirement age and fuel taxes
a day ahead of nationwide civil service strike.
Prime Minister George Papandreou told a cabinet
meeting that the reforms “must go ahead now …
with greater speed.”
“Our primary duty now is to save the
economy and reduce the debt, aiming to do so through the
fairest possible solutions that will protect — as
far as that is possible — the weaker and middle classes,”
said Papandreou, who is to meet in Paris with French President
Nicolas Sarkozy on Wednesday ahead of a European Union summit
the following day.
The new tax bill, Papaconstantinou said, will
increase the burden on the rich while easing taxation for
those on low incomes. The top income bracket which will
be taxed by the maximum 40 percent will be expanded to include
incomes of over euro 60,000 a year, from the current euro
75,000 threshold.
Papaconstantinou said that public consultation
over the tax bill continued, and that there could be changes,
but that any amendments would be based on the broad principles
outlined in the draft.
He confirmed plans to freeze public sector
hirings and wages, while cutting bonuses or stipends by
10 percent, a move he said would trim between euro18 and
euro345 euros off monthly salaries. The stipend cut will
also apply to those of the prime minister, ministers and
other high-ranking ministry officials.
“We all know that the civil service salary
system is one full of injustices, that lacks any central
logic and has evolved with successive bonus payments,”
Papaconstantinou said. “We are committed to have a
unified payment system.”
He also said all Greeks must collect receipts
in order to qualify for the income tax-free amount of euro12,000
— an attempt to crack down on widespread tax evasion,
where vendors under-declare their income by not giving receipts.
Cash registers will have to be installed everywhere, including
kiosks found on practically every Greek street, and food
markets.
Pensions
Increase
In a move that makes little economic sense in light of attempted
austerity measures everywhere else, Greece to grant pension
increases of 1.5 pct.
"All pensions will increase by 1.5 percent,"
Finance Minister George Papaconstantinou said in a television
interview.
The government did not intend to raise the
nation's top 40 percent income tax rate as part of measures
to shore up its finances, he said.
I have little faith this will work because revenue projections
are sketchy and austerity measures will undoubtedly plunge
Greece into a severe recession, if not depression.
Will Greece have the resolve to cut more if necessary? Will
France and Germany pony up after a "good faith"
try by Greece?
In light of Eurogroup Chairman Jean-Claude Juncker's Grecian
Bluff, there are still more questions than answers. The EU
simply has no plans if Greece fails.