Will the increase in net wages be set at 10%? Income tax withholding increase rate will be doubled: 20%. This means that net income will never increase in line with the nominal increase, as the IRS applies “scissors”.

This is the result of the so-called “non-indexation adjustment” of the tax scale. That is, maintaining the levels at the previous levels. This results in any additional income from the nominal increase being taxed at an increasingly higher rate. In fact, 2023 will be a “significant year” as for the first time, even minimum wage earners will be subject to income tax withholding. Even in the worst-case scenario – the one that predicts an increase in the minimum wage to 752 euros, i.e. at pre-morandum levels – the tax office will request a tax of about 39 euros from each recipient of the minimum wage. .

The higher the allowance and the higher the salary, the proportionally higher the “tax” of the tax inspectorate. Keeping tax categories at the same level is not a phenomenon this year. In practice, the same scales have been in place since 2016, with the highest rate of the scale (44%) applied to persons with an annual income of more than 44,000 euros in one or more jobs.

As long as inflation remained at zero or very low levels, the problem was invisible. But now, as workers demand an increase to cover the loss of purchasing power (over the three years 2021-2023, cumulative inflation will exceed 20%), the tax scale will act as a deterrent. The employer will pay 10% more and net wages will increase by 8% or less.

If it increases to 752 euros, i.e. at the level preceding the memorandum, the tax office will request a tax of approximately 39 euros.

An employee with a gross earnings of 1,500 euros (21,000 euros gross annually) receives 1,148 euros net, as he pays 208 euros of insurance premiums and 144 euros of income tax (by withholding). In the positive scenario, when the employer gives him a bonus of 150 euros (i.e. 10%) to fully cover the loss of income from inflation, gross earnings will increase to 1650 euros (23,100 euros per year), and net will be 1,247 Euro. . And this is because insurance premium deductions will increase from 208 to 229 euros, and income tax deductions from 144 to 174 euros. So while gross wages will increase by 10%, net wages will rise by 8.6% as monthly income tax withholding will increase by 20.8%. Increasing withholding tax twice as fast as increasing nominal wages is also a major barrier to the creation of well-paid jobs, which is rare in Greece. With a gross salary of €2,800 (only 70,000 workers in Greece receive this salary), there is a withholding tax of €493 per month, and a net remuneration of €1,919 after insurance premiums. If €2,800 becomes €3,080, then the withholding tax will jump to €585 and the net commission to €2,068. That is, the net increase will be 7.7%.

The very high deductions are also the main reason why more and more employers are opting for in-kind benefits, such as food stamps, a company car, fuel cards, etc., instead of cash inflows. These benefits are not subject to income tax or insurance premiums. – in fact, meal vouchers have recently been increased from €6 per day to €7 – so the final cost for the employer is lower and the net increase for the employee is greater.

All workers who are paid the minimum wage after the increase, which will be given from April 1, will also be required to pay income tax. It looks like the 5.5% increase in gross will be reduced to 5.05% net, as in this case, 713 euros gross will become 752 euros, and the net will increase from 614 to 645 euros by deducting 39 euros per year. . This is the most unfavorable scenario in existence. One of the most optimistic predicts a 9.6% increase in the minimum wage, in line with inflation. Gross will increase to 781 euros, but net will increase to 668 euros, i.е. by 8.79%, while the tax inspectorate “nibbled off” almost one percentage point. Each employee will pay 71 euros in income tax for the entire year.