Greece will begin lowering taxes and social security contributions in an effort to support economic growth, create jobs and attract investment. Speaking in the northern city of Thessaloniki, Prime Minister Alexis Tsipras laid out a four-year fiscal boost for the country while continuing to honor Greece’s budget targets.
With the government budget set for another surplus year and the economic recovery gathering pace, Greece is moving to rebalance some of the tax and other fiscal burdens that have restrained growth. The new fiscal plan comes as Greece enters a new era: on August 20, the country successfully concluded its third and final adjustment program marking the end of an almost decade-long economic crisis.
Emerging from recession last year, Greece has posted six successive quarters of positive economic growth and the economy is forecast to grow by about 2.5% this year. The Greek government has also outperformed budget targets set by international creditors. According to the latest data, the Greek state budget posted a primary surplus of €3.1 billion through August, versus a target of €917 million.
“Not only is the country achieving its primary surplus targets, but in the past three years it has surpassed them by a lot, something we expect this year as well,” Mr. Tsipras said at the start of the Thessaloniki International Fair in early September.
Among the initiatives is a phased reduction in corporate income taxes starting Jan. 1, 2019. Over four years to 2022, Greece will cut corporate taxes to 25% from 29% currently. Likewise starting next year, social security contributions for the self-employed – who make up the bulk of the Greek workforce – will also be cut by up to 35%.
Starting in 2019, Greece will cut property taxes by as much as 50% for 1.2 million taxpayers with small real estate holdings, and by 30% on average. And from 2021, Greece will cut the top value-added tax rate to 22% from 24%, and the lower tier rate to 12% from 13%.
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