Window for new exemptions – Ministry estimates additional financial space of €350 million

Written by Tassos Dassopoulos

The largest reduction in insurance contributions from the 0.5% planned for 2025 is now possible, as the Ministry of National Economy and Finance has changed its planning and now intends to take measures worth €880 million announced since April, to make additional tax expenditures of €350 million.

It is estimated that the €350 million represents an overperformance of revenues until the end of the year due to the good trajectory of the economy, efforts to combat tax evasion but also additional revenues of €1.2 billion from special arrangements made by the government. End of 2023. Additional revenues will come in particular from virtual taxes for the self-employed, of which it is expected to generate additional revenues of €530 million and increases in nightly charges in all accommodation, of which additional revenues of €530 million are expected. 650 will enter the funds worth one million euros. These funds will be the proceeds to cover damages resulting from natural disasters.

The most likely scenario is to allocate the surplus of €350 million to further reduce insurance contributions. Based on current planning, a 0.5% reduction in costs is expected for 2025 at a cost of €225 million and an additional 0.5% in 2027. With the additional fiscal space now in place, it is very likely that insurance will be reduced and contributions are expected to eventually rise to 1% as of this year with the possibility of further reductions in the future. A faster reduction in insurance contributions is a need that Prime Minister Kyriakos Mitsotakis has mentioned several times in his statements.

Spending ceiling

In fact, the reduction in insurance costs does not affect the 3% cap on the increase in net primary costs already announced by the European Commission. This is because it reduces income, but does not directly burden expenditure.

On the spending front, the Finance Ministry is keeping “safe distances” from the maximum increase for both 2024 and 2025. In particular, for the current year, against the 2.5% increase imposed by the European Commission since last year, the ministry stated in the Stability Programme 2024-2025 that it will increase spending by 2%. In its spring report based on the European semester, Greece appears to have stated that net primary spending will ultimately rise by only 1.8% this year.

An increase in spending is expected in 2025 as well. This tactic is intended to be practiced proactively, as the new financial rules will actually be implemented for the first time in 2025.

There are still issues to be clarified regarding their capture and calculation. Thus, if the numbers are marginal, there may be deviations that would put Greece in a difficult position at a very sensitive point for the EU.