In a setting reminiscent of a Roman triumph and having been systematically prepared for communication in recent months, Greek Prime Minister Kyriakos Mitsotakis announced the “biggest tax reform” of recent decades, as he called it.
The cost to the budget will amount to 1.6 billion euros and approximately 4,000,000 taxpayers will receive a “cookie”, some smaller and some a little larger.
The measures will be applied to 2026 incomes and, apart from employees and pensioners who will see a small reduction in tax withholding from next January, everyone else will have to wait for their tax returns to be cleared in 2027, which, coincidentally, is also the deadline for holding national elections.
The main element of the announced tax reform is the reduction by 2 points of the average rates of the income scale of natural persons. The exceptions are the initial bracket, up to 10,000 euros, where the rate remains unchanged at 9%, and the bracket from 40,000 to 60,000 euros per year, where the rate is reduced by 5 points, from 44% to 39%. Why this special favor for clearly higher incomes?
The Prime Minister is proving to be very stingy. The “growth dividend” that supposedly returns to society is only a small fraction of what it collects annually from society through inflation in combination with the unchanged rates of indirect taxes, such as VAT and Excise Taxes on fuel, tobacco, alcoholic beverages, etc. The more the prices of goods and services increase, the more revenue the state collects.
These are Mr. Mitsotakis’ Trees that yield money instead of fruit, even though he wants Greeks to believe that there are no such “trees” in the Eurozone. He wants to maintain their exclusive cultivation.
From the beginning of 2022 to July 2025, the consumer price index increased by 18.4%. The increases in food and energy were particularly high. As a result of inflation, VAT receipts from 2021 to 2024 increased by 8.2 billion, while by the end of 2025 it is estimated that they will increase to 9.5 billion. That is why Mr. Mitsotakis did not include any reduction in VAT rates in the “great tax reform”. The only exception is the 30% reduction (from 24 to 16.8% and from 13 to 9.1%) for islands with a population of under 20,000 inhabitants. Reduced VAT rates have already been in effect for years on five islands in the Eastern Aegean.
The Greek Prime Minister’s announcements also included a reduction in the tax rate by 2 points for each of the first two children, by 11 points for the third child and zeroing it for four or more children. Be careful, however, these reductions only concern the income bracket from 10,000 to 20,000 euros. In all other brackets, the rates do not change.
In Greece, which is demographically dying, the measure is in the right direction, but, in itself, it is ineffective. No family will have an additional child because the tax rate will be reduced by a few points in just one of the income brackets.
A large family needs professional security for the parents, that is, to have a guaranteed income for the next many years, a house commensurate with its members, social support services, if both parents work, etc.
Certainly, after the Prime Minister’s pompous announcements and the propaganda that will follow in the next period from the systemic media, each citizen will make his calculations as to whether there will be any personal benefit and what it is.
What is certain, however, is that the new tax measures are not due to the development of the Greek economy, but to an increase in GDP from consumption, tourism and investments in construction.
Last year, in 2024, for the first time since the era of financial support programs, the Greek state budget showed, after paying interest on the public debt, a fiscal surplus (not a primary result) of 3.2 billion euros or 1.3% of GDP. For this year, with the help of inflation and unchanged VAT rates, this surplus can be expanded.
The question is how is it used? To boost production in the agricultural and industrial sectors or to serve the electoral cycle by the ruling party?
