Table of Contents
- 1 Budget: The amount of tax pages
- 2 The uncertainty
- 3 The TIF’s measures
- 4 The thorns
- 5 The oil
- 6 Tax revenue
- 7 Indirect taxes
- 8 The properties
- 9 The income tax
- 10 The growth rate
- 11 Increases in salaries and pensions
- 12 The cost of wage intervention
- 13 How sustainable are the projected increases in tax revenue for 2025, and what potential ramifications could the decrease in ENFIA (property tax) revenue have on local government funding and public services?
Every year, at a time like this, when the state budget is submitted to the Parliament in order to be voted on in mid-December, reading the pages of the introductory report, one notices several “thorns” and “pitfalls” for its implementation, while the respective government, depending on the circumstances and the fiscal margins that exist, it proceeds with targeted benefits, positive forecasts but also optimistic messages.
Budget: The amount of tax pages
In any case, on the 228 pages of the budget report, there is a table that gains the most interest and it is none other than the one that includes in detail the origin and amount of tax revenues and through this table one can see who is invited to pay the “marble” of surpluses and any benefits.
In fact, many times those who seem to be the beneficiaries of various measures included in the budget are also the ones who will pay the most taxes overall.
The uncertainty
At the same time, any positive forecasts for various important fields of the economy are based on specific data that can at any moment be overturned due to the uncertainty prevailing at the international level from geopolitical developments due to the ongoing wars in Ukraine and the Middle East .
Also, no one can overlook the fact that the government is called upon to achieve the 2025 budget targets based on the new stricter rules set by the Commission in the context of the European Union’s economic governance.
The TIF’s measures
The new budget includes all the positive measures recently announced by the Prime Minister from the stage of the 88th International Exhibition of Thessaloniki and is balanced between the good image shown by the Greek economy in recent years and the geopolitical developments that can at any time bring things up and down in the prices of electricity, fuel, inflation.
The thorns
Consequently, one of the biggest thorns in this year’s budget is the additional fiscal costs that may arise if the government needs to cover with extraordinary measures the increased prices for fuel and electricity. After all, something like this is expected to happen in December when energy prices will be significantly higher compared to the current month.
Also, no one can predict the cost of a new natural disaster that may occur due to floods, fires or other phenomena.
At the same time, if the prices of fuel and energy in general rise to very high levels then inflation will escape again with correspondingly significant negative effects both on the economy and on the pockets of households.
The oil
It is noted that for the price of oil, the escalation of conflicts in the Middle East significantly increases the uncertainty in the markets. According to the budget report, downward pressure on oil prices is expected to be exerted by reduced oil demand and a gradual increase in production in both OPEC+ and non-OPEC+ countries.
According to the European Commission’s economic forecasts of November 2024, the average Brent oil price from 82.5 dollars per barrel in 2023 is expected to decrease by 2.1% in 2024 and further by 9.4% in 2025 to 80 .7 and 73.1 dollars per barrel in the years 2024 and 2025, respectively.
However, as the authors of the report admit, these forecasts involve a significant degree of uncertainty based on the recent geopolitical developments in Ukraine and the possibility of further spread of the war in the Middle East.
If something like this happens, international analysts determine the price of oil well above 100 dollars a barrel. A trap that no one can ignore.
Tax revenue
However, with the current data, tax revenues are expected to rise next year to 69.2 billion. euros, compared to 66.7 billion euros which is projected to be the total tax collections at the end of 2024. This means that on an annual basis tax revenues will increase by 3.7%.
The main reason for this increase is the projected growth of the economy, as reflected in the macroeconomic forecasts, but also the further reduction of tax evasion.
It is worth emphasizing that in the 2025 draft budget that was submitted to the Parliament at the beginning of October, the total amount of tax revenues for 2025 amounted to 68.7 billion. euros, i.e. 500 million euros less compared to those included in the final plan.
The Ministry of Finance estimates that after the measures they have taken against tax evasion, the universal application of Mydata and the interconnections of POS with cash registers, the tax collection mechanism is performing much better than initially expected without any increase in tax rates.
Indirect taxes
Revenues from taxes on goods and services (cumulative VAT and VAT) are expected to reach the amount of 38 billion. euros, increased by 1.6 billion euros or 4.4% compared to 2024. In particular, VAT revenues are expected to reach the amount of 26.7 billion. euros, increased by 1.4 billion euros compared to 2024, and the tax credits are foreseen in the amount of 7.27 billion. euros and are increased by 47 million euros against 2024 or 0.65%.
The properties
The revenues from regular real estate taxes, i.e. ENFIA, are expected to reach the amount of 2.39 billion. euros, reduced by 39 million euros compared to 2024, mainly due to the reduction of ENFIA by 20% (instead of the current 10%) for owners – natural persons who will insure their homes, with a taxable value of up to 500,000 euros, for natural disasters.
The income tax
Income tax revenues are expected to reach 25.2 billion. euros, increased by 1 billion euros or 4.1% compared to 2024.
In particular, the personal income tax is expected to amount to 15.24 billion. euros, increased by 881 million euros or 6.1% compared to 2024, as a result of the growth of the economy and the expected new increase in the minimum wage and the corporate income tax is predicted to reach the amount of 7.97 billion. euros, increased by 120 million euros or 1.5% compared to 2024.
The growth rate
The growth rate of the Greek economy is expected to rise to 2.2% in 2024 and 2.3% in 2025 with GDP in nominal terms increasing in 2025 compared to this year by 10 billion. euros, while inflation will decrease in 2025 to 2.1%, from 2.7% which is estimated to close this year.
At the same time, investments are expected to increase by 6.7% in 2024 and 8.4% in 2025 and the unemployment rate to decrease from 10.3% in 2024 to 9.7% in 2025.
A significant de-escalation is expected to occur in General Government debt as a percentage of GDP as it will stand at 154% in 2024 and will decrease to 147.5% in 2025 (down 1.6 percentage points compared to the October draft).
However, in absolute numbers, the public debt will be at the same level as in 2024, as it will remain at 365 billion. euro.
Increases in salaries and pensions
For the minimum wage, an increase of around 40 euros is expected in April 2025, from 830 euros to 870 euros, and at the end of 2027 it will have reached the government’s pre-election commitment of 950 euros, while from the reduction of insurance contributions by 0.5 percentage points for employees and another for employers, employees will see increases of 4.15 euros gross if they are paid the minimum wage of 830 euros, 5 euros if they are paid 1,000 euros, 6 euros if they are paid 1,200 euros, 7.5 euros for a salary of 1,500 euros and 10 euros increase for a salary of 2,000 euros.
Pensions are expected to increase from the new year by 2.4% (it will be seen in pension payments at the end of December) and through this increase the taxes collected by the state will also increase. In total, the increases in pensions will have a budgetary cost of 398 million. euros, while the pensioners who will see in their pocket the increase of 2.4% are approximately 1.9 million and who do not have a personal difference.
The cost of wage intervention
With regard to the salaries of the State, from April 2025 there will be a new increase in the basic salaries of all civil servants as the introductory salary will not fall short of the level of the minimum salary of the private sector.
According to the introductory budget report, the gross cost of the new intervention for 2025 in this phase is estimated to amount to approximately 143 million. euros as, as noted, the final cost to the budget and of course the increase in entry wages in the Public sector will depend on the final increase in the minimum wage in the private sector.
Based on the new increase launched in the minimum wage, a horizontal increase in the wage scales of all civil servants from 1/4/2025 of approximately 20 euros is foreseen. This is because today the basic salary in the public sector amounts to 850 euros (20 euros higher than in the private sector), but from April 1, 2025, if the minimum increases to 870 euros, it will fall short by 20 euros and this difference will be covered in the form of an increase.
Source: ot.gr
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How sustainable are the projected increases in tax revenue for 2025, and what potential ramifications could the decrease in ENFIA (property tax) revenue have on local government funding and public services?
## Budgeting Thorns and Pitfalls: A Discussion Guide
This article explores Greece’s 2025 draft budget, highlighting both its positive measures and potential pitfalls.
Here’s a guide for a discussion based on the provided text, divided into thematic sections:
**Section 1: Economic Outlook & Uncertainties**
* **Open-Ended Questions:**
* The article mentions that Greece’s economic growth is projected to be 2.2% in 2024 and 2.3% in 2025. Do you think these projections are realistic given the global economic climate and potential geopolitical risks? What factors could cause these projections to be overly optimistic or pessimistic?
* The article identifies rising energy costs and potential natural disasters as major potential threats to the Greek economy. What steps could the government take to mitigate these risks and ensure economic stability?
**Section 2: Taxation & Revenue**
* **Open-Ended Questions:**
* The budget forecasts an increase in tax revenue in 2025. Is this solely due to economic growth, or are there other factors at play, such as changes in tax policy or increased enforcement? How sustainable are these revenue projections?
* The article highlights a decrease in ENFIA (property tax) revenue. What are the potential implications of this reduction for local government funding and public services?
* Do you see the proposed increases in the minimum wage and pensions, alongside the reduction in insurance contributions, as positive moves for Greek citizens? Will these measures outweigh the increased costs for businesses and the potential for inflation?
**Section 3: Public Debt & Spending Priorities**
* **Open-Ended Questions:**
* Although public debt as a percentage of GDP is expected to decrease, the absolute amount remains unchanged. What does this suggest about the long-term sustainability of Greece’s fiscal position? What strategies could the government employ to address this issue?
* What are your thoughts on the government’s spending priorities, particularly the focus on public sector wages? Are these investments justified, or should resources be directed towards other areas, like healthcare, education, or infrastructure?
**Section 4: Broader Implications & Future Outlook**
* **Open-Ended Questions:**
* What are the potential implications of Greece’s 2025 budget for the country’s competitiveness within the European Union?
* How might the decisions outlined in the budget impact foreign investment and economic growth in the long term?
* What are your predictions for the Greek economy in the coming years? What factors do you think will have the biggest impact on its performance?
This discussion guide aims to encourage a thoughtful and nuanced conversation about the Greek 2025 draft budget, going beyond simply accepting the presented information and prompting participants to critically analyze its complexities and implications.
