Workers in Greece experienced the fourth largest decline in real wages in 2022. incomebecause of inflation among all its member countries OECD. The loss is linked to rising cost of living several times the rise in nominal income, but it also adds to the country’s “permanent weaknesses”: an unfavorable tax regime for families with children – a couple with two children in Greece ranks as the 4th worst-treated among 38 OECD countries, but also tax avoidancewhich leads to the fact that any policy of benefits “aims” not at the weakest, but at those who show their tax return lowest income: 40% of taxpayers with an annual income of no more than 5,000 euros and an additional 20% of families with an income of 5,000 to 10,000 euros per year.

The purchasing power of a family is measured by subtracting tax and social security contributions from gross income, adding any benefits, and accounting for increases in the cost of living as recorded (in part as changes in financial costs such as loan contributions not included) in the inflation index. The OECD “measured” a +1.5% change in income, increasing annual earnings to €19,912 from €19,614 in 2021. This figure also includes employer contributions. If they are removed, the gross earnings corresponding to the employee will be limited to approximately 15,000 euros. And if you subtract more tax and social security contributions, you are left with approximately 12,350 euros per year, or 930 euros per month.

The growth was estimated by the OECD at 1.5%, on the one hand, because employer contributions were taken into account (which were reduced in 2022, not increased), and on the other hand, because the average value for all employees was used. The minimum wage rose by 1.5%, but hundreds of thousands of private sector workers did not receive a raise, which seemed to hold the average. However, that there was a loss of income in 2022 is clear to everyone, as inflation reached 9.7% without taking into account the burden of the rising value of money.

The agenda of the pre-election dialogue has already included the issue of increasing nominal wages and the issue of deductions on taxes and insurance premiums, as well as the issue of price containment. Both the government and the official opposition are in favor of increasing nominal wages, and there are different approaches to the issue of accruals, while the current government advocates a further reduction in insurance premiums and an increase in tax-free benefits for families with children, and the official opposition proposes to reduce indirect taxes.

In 2022, Greeks experienced the fourth largest decline in real income among OECD countries.

If the proposed measures and the growth of the economy bring the average gross salary to 1,500 euros (from 1,176 euros today), as also mentioned by the Prime Minister, the net profit will form from 930 euros to 1,148 euros. That is, a gross increase of 334 euros increases net earnings by 262 euros, and the rest is lost through tax and social security contributions. Thus, the following obstacles will arise in the efforts that will be made over the next 4 years to increase real incomes:

1. Inflation will continue to eat into real income, reducing purchasing power.

2. The tax scale, if not indexed, will result in more and more nominal wage premium being withheld.

3. Those who currently receive statutory allowances risk losing their allowances due to nominal wage increases unless the income criteria for the allowances are adjusted. This is an area where injustice thrives due to tax evasion. Law-abiding (mostly salaried) people will be at risk of higher deductions and loss of benefits, in contrast to tax evaders, who will keep all their “income”.

Overweight in couples with children

The “hidden” negative, first of all for Greece, is revealed by the OECD study on deductions from wages from taxes and social security contributions. Our country has one of the five worst policies to support families with two children through the tax system.

In practice, whether someone is single or married with two children, they enjoy the same tax treatment, which is not – at least to this extent – in any other European country. Of all the OECD countries, only Turkey, Mexico, Chile and Costa Rica were worse than Greece.

Greece first

A person in OECD member countries is subject to tax and social security contributions, corresponding to 34.6% of total income. A married person with two children, who also brings the only income to the household, is perceived much more favorably, as the rate is reduced to 25.6%, i.e. 8.9 points down. What is the corresponding percentage in Greece? Only 3.4%, which is the worst figure among all OECD countries. Because while 37.1% of gross earnings are withheld from one person, that percentage drops to 33.7% for a married person with two children.

Comparison with countries ranked first on the list is chaotic. In Poland, the rate of singles is 33.6%, while the rate of married with two children is 11.9%. In Luxembourg, 40.4% of bachelors become 20.1%, while in the Czech Republic 39.8% fall to 22.7%. Austria, Belgium, Germany, Slovakia, Ireland, Slovenia, New Zealand, Switzerland, Latvia and other countries are still showing a decrease of more than 10 percentage points.

Whether a person is single or married with two children, they enjoy the same tax treatment.

So the problem in Greece is twofold. On the one hand, the already very high retention rate – 33.7% is one of the highest in the OECD list for families with two children – and on the other hand, the lack of an effective family support policy through the tax system. .

reservations

In terms of undergraduate reservations, Greece is above the average for OECD countries (37.1% vs. 34.6%), but according to this indicator, the country ranks 19th among OECD countries (38 countries in total). For families with two children, the rate drops to 33.7%, but the country is among the 8 countries with the highest tax burden. Only Finland, France, Belgium, Sweden, Turkey, Italy and Spain apply a higher rate in this category. Compared to 2021, the situation has not improved. There is a decrease compared to 2019, when the booking rate was 37.2%.