2.2 Tax policy reforms
A major reform of the income tax system and a package of revenue measures are included as prior actions in the fiscal package described in section 2.1. These measures will help widen the tax base, improve tax efficiency and collectability, and boost labour supply.
In addition, the government commits to:
i.Tax reforms: the authorities will by [June] 2016, (a) review all business income tax incentives and integrate the tax exemptions, including the new investment law into the ITC, eliminating those deemed inefficient or inequitable; b) review and phase out preferential tax treatments for the shipping industry in line with the indications of the European Commission; c) extend the temporary voluntary contribution of the shipping community to 2018; d) issue all remaining secondary legislation necessary for the implementation of ITC and TPC. {Again, the creditors want to push for a lift on the shipowner's tax privileges. Still since all 56 tax exemptions seem to be constitutionally protected it seems that the shipowners will continue to be a unique group which can only be taxed voluntarily. Further on, the creditors seem to accept that.}
ii. Tax codes.The authorities will by September 2016 for implementation in January 2017 (key deliverable), a) codify and simplify the VAT legislation, aligning it with the tax procedure code, eliminating outstanding loopholes and shortening the VAT payment period; b) simplify the income tax regime and ensure consistency of the income base for income tax and social security contributions of small businesses below the VAT registration threshold; c) modernise the corporate tax law in ITC covering mergers and acquisitions and corporate reserve accounts and implement ITC provisions concerning cross-border transactions and transfer pricing; d) develop the tax framework for collective investment vehicles and their participants in line with best practices in the EU; e) review the withholding tax on technical services; f) conduct a comprehensive review of remaining tax legislation that is in conflict with the ITC and TPC, integrating these acts where appropriate; g) revise TPC provisions to provide for incentives for cooperation at the stage of the audit by means of reduced fines; h) review the potential for a short-term extension of the tax certificate as a quality standard with no explicit advantage for businesses and without compromising the primary audit authority of the revenue administration; i) undertake a review and reform of the KEDE, including revenue administration procedures for enforced sale of assets at public auctions
iii. Property tax.The authorities will by June 2016 provide detailed proposals that will ensure the alignment of property tax assessment values with market prices by June 2017 (key deliverable). By September 2016, cross-checking of all ownership interests will have taken place against the available information on all individual properties in the cadastre.
The Government commits to enact reforms of both direct and indirect taxation to improve efficiency, collectability and boost labour supply. 8
In July 2015 the Government has already legislated a major reform of VAT aiming at simplifying the VAT structure, broadening the tax base and eliminating and streamlining exemptions, generating around 1% of GDP in annual revenues.
The government commits to further reforms as follows:
i. As a prior action, the authorities will: a) eliminate the cross-border withholding tax introduced by the instalments act (law 4321/2015) and reverse recent amendments to the Income Tax Code (ITC) introduced in laws (4328/2015 and 4331/2015); b) clarify that the VAT island discounts will be fully eliminated by end-2016 and define the transitional arrangements.
ii. Tax Codes. By September 2015 adopt outstanding reforms on the tax procedures codes: a) introduce a new Criminal Law on Tax Evasion and Fraud to amend the Special Penal Law 2523/1997 and any other relevant legislation, and replace Article 55, paragraphs 1 and 2, of the Tax Procedure Code (TPC), with a view, inter alia, to modernize and broaden the definition of tax fraud and evasion to all taxes; abolish all Code of Book and Records fines, including those levied under law 2523/1997; b) issue a circular on fines to ensure the comprehensive and consistent application of the TPC; c) ensure appropriate single-violation penalties for breach of the accounting code; non-issuance or incorrect issuance of retail receipts will be treated as a single but serious procedural violation for VAT (key deliverable). By February 2016, the authorities will conduct a comprehensive review of remaining tax legislation that is in conflict with the ITC and TPC, integrating these acts where appropriate, and by March 2016 issue all secondary legislation to implement the ITC and TPC.
iii. Income tax. By October 2015, the Government will: a) simplify the personal income tax credit schedule; b) re-design and integrate into the ITC the solidarity surcharge for income as of 2016 to more effectively achieve progressivity in the income tax system; c) identify all business income tax incentives and integrate the tax exemptions into the ITC, eliminating those deemed inefficient or inequitable; d) undertake a review and reform of the KEDE, including revenue administration procedures for enforced sale of assets at public auctions; e) ensure the revenue administration’s adequate access to taxpayers' premises for conducting timely audits and enforcement purposes; f) review the framework of capital taxation and develop the tax framework for collective investment vehicles and their participants consistently with the ITC and in line with best practices in the EU; g) review the withholding tax on technical services; h) In view of any revision of the zonal property values, adjust the property tax rates if necessary to safeguard the 2016 property tax revenues at least €2.65 billion and adjust the alternative minimum personal income taxation; i) review the operation of the alternative minimum tax (including correcting any backtracking); j) close possibilities for income tax avoidance; k) tighten the definition of farmers. (key deliverable)
iv. VAT. The authorities will by March 2016, a) codify and simplify the VAT legislation, aligning it with the tax procedure code, eliminating outstanding loopholes and shortening the VAT payment period; b) simplify the income tax regime and ensure 9 consistency of the income base for income tax and social security contributions of small businesses below the VAT registration threshold; c) modernise the corporate tax law in ITC covering mergers and acquisitions and corporate reserve accounts and implement ITC provisions concerning cross-border transactions and transfer pricing. (key deliverable)
v. Property tax. The authorities will by September 2016 align all property assessment values with market prices with effect from January 2017. By that date, crosschecking of all ownership interests against the information on all individual properties in the cadastre. (key deliverable)