Greece Votes to Raise Tax on Higher Earners

ATHENS — Greek lawmakers voted late Friday to increase taxes on middle- to high-income earners, self-employed professionals and businesses despite vehement objections by the political opposition and several ruling coalition deputies who said austerity-weary citizens should not be subjected to further pain.

The change to the tax code, one of a long line of pledges Greece has made to international creditors in exchange for continued bailout money, passed comfortably with at least 162 of the ruling coalition’s 163 members backing the articles in a roll call that came after two days of heated debate in the 300-seat Parliament.

The fragile coalition government of Prime Minister Antonis Samaras hopes to raise 2.3 billion euros in much-needed revenue from the new law, which increases the amount of income tax paid by those earning more than 20,000 euros a year, trims tax benefits for having children, revokes tax breaks for farmers and increases corporate tax to 26 percent from 20 percent. The new law also increases the amount of income tax paid by self-employed professionals like doctors and electricians, who are widely perceived as not paying their share by understating their income. New rules abolishing a tax-exempt threshold means the self-employed would be taxed from the first euro they earn.

Defending the bill in Parliament, Finance Minister Yannis Stournaras called it “a vital fiscal reform” that would avert additional across-the-board cuts to workers and pensioners.

“Every euro collected in tax revenue is one euro saved from salaries, pensions and social benefits,” he said. He rejected a flurry of amendments from members of two junior parties in the coalition and the opposition, noting that such costly changes would throw Greece off the path to economic health and put further bailout money in jeopardy.

Calling Mr. Stournaras a “political terrorist,” Panagiotis Lafazanis, a lawmaker of the leftist party Syriza, which opposes the terms of Greece’s bailouts, said the tax bill was “the nail in the coffin of social justice,” adding that “Greek society is more important” than its creditors.

Other opposition lawmakers berated the government for planning to impose additional measures in the coming days, including tighter control of the budgets of ministries and state utilities, the reduction of parliamentary employees’ wages in line with cuts to the wages of other civil servants, and the revision of Greece’s second loan agreement with foreign creditors, in the form of special edicts that do not require parliamentary approval. The loan agreement amendment surrenders the country’s rights to protect its assets from creditors, Syriza complained.

Since 2010, the European Union and the International Monetary Fund have committed to two bailouts for Greece worth 240 billion euros in exchange for austerity measures that have hurt Greek living standards, pushed unemployment close to 27 percent and fueled angry street protests.

The new law is to be followed in spring by a thorough overhaul of the tax system that will introduce jail terms for large-scale evaders instead of the suspended sentences handed down now.

Greece’s failure to crack down on widespread tax evasion came into sharp focus over the holidays after prosecutors revealed that the names of three relatives of the former finance minister George Papaconstantinou had been removed from a list of some 2,000 wealthy Greeks with Swiss bank accounts. Parliament is to vote next Thursday on whether Mr. Papaconstantinou, and his successor as finance minister, Evangelos Venizelos, who leads the coalition’s Socialist party, will face a parliamentary inquiry on whether they should be indicted on charges of criminal tampering and breach of duty.

Article source: http://www.nytimes.com/2013/01/12/business/global/greek-lawmakers-back-tax-increase.html?partner=rss&emc=rss