Gov't to unilaterally scrap pre-legislated measure to reduce annual tax-free income threshold

The draft amendment had been announced last week, one of several pre-election relief measures abruptly announced by the foundering hard left government before and after twin election defeats over the past three weeks – the first being the European Parliament election on May 26, in tandem with disastrous results over two consecutive Sundays in local government races.

Greek Prime Minister Alexis Tsipras had himself announced the legislative overturn of the cut, one of several tax hikes and austerity measures passed in 2016-17 to meet creditors’ mandated fiscal targets as part of the third bailout.

The move also comes a day after a particularly negative post-bailout report on Greece’s finances and economic outlook, issued by the EU Commission, with the consensus in Athens being that Tsipras and his poll-trailing SYRIZA government have bypassed European creditors’ acquiescence for the measure’s axing.

Main opposition New Democracy (ND) had tabled a similar draft amendment last month, which the government ignored. On Thursday, it was ND’s turn to snub the government’s proposal, as its MPs are abstaining from Parliament’s sessions – as are practically all other opposition MPs, sans a handful of MPs from the essentially defunct Potami party. Opposition parties in the country have vociferously warned that the outgoing government lacks the political mandate to legislate, as Tsipras has publicly announced that he'll resign and ask for a snap election on July 7. Nevertheless, after announcing his resignation, the Greek prime minister avoided a visit to the presidential mansion to officially tender his resignation, which would have dissolved the current Parliament plenum.

Beyond the fact that Tsipras and his leftist SYRIZA will most assuredly play up the move as proof of their anti-austerity and populist credentials – and despite creditors’ expectd ire – abolition of the measure to reduce the tax-free income threshold will be accompanied by the scrapping of other so-called “positive countervailing” measures, which were enacted simultaneously with the cut.

The “positive measures” had been legislated along with the reduction in the tax-free annual income threshold, which was set to fall to around 5,500 euros.

Among the “positive measures” that, by extension, will axed are:

- Abolition of a special “solidarity tax” for annual income of up  to 30,000 euros, and reductions in incomes exceeding 30K

- A reduction in the income tax rate from 22 percent to 20 percent.

- Reductions in the property tax rate (ENFIA), up to a modest 70 euros.

 Another “specter” that appeared on the horizon is the possibility of a deficit being created in 2020 and 2021 for the next government, given that the reduction in the tax-free income threshold was expected to generate more revenue for state coffers than the “positive measures” to be enacted.