Inspectors lose some of their arbitrary powers; fining system replaced
The government yesterday presented major tax incentives for companies planning large investments, including a preferential lower rate and the option of forming tax-free reserves for investment.
According to the draft bill unveiled by the Economy and Finance Ministry, firms investing more than 30 million euros in productive installations will be liable to a 25 percent tax rate on their net profits for 10 years, instead of the present 35 percent. Also, all enterprises are given the opportunity to form a tax-free reserve from their undistributed profits in the five years from 2004 to 2008. Up to 35 percent of undistributed profits may be channeled into the reserve and has to be invested within three years of its formation.
Point system
The draft bill also includes provisions for a radical departure from the present system of tax inspections and penalties for tax-code violations, aimed at simplifying and improving relations between tax officials and taxpayers by largely automating procedures. The new provisions, likely to come into force on January 1, replace fines with a point system whereby firms are centrally selected for tax inspection according a priority scale based on the number of punitive points for tax or customs offenses. A low number of points means a firm is placed on a list for possible greater probing, but a high number will lead to a reassessment of results and increments on the tax rates applicable.
The number of punitive points will depend, among other criteria, on the type of tax or customs violation, the firm’s size, financial and other data, and their sector of economic activity, reflecting differences in the incidence of offenses. Construction companies, for instance, will be debited with more points because the sector has a high incidence of violations.
The new system will apply to firms or professionals with a gross annual revenue of up to 30 million euros. Instead of fines, it institutes 11 tiers of points between one and more than 100,000, corresponding to incremental factors scaled from 0.5 to 20 which automatically raise a company’s or a professional’s gross revenue, thereby increasing the offender’s tax burden. Companies and professionals are given the opportunity to voluntarily report offenses within the fiscal year and to redo their books through internal audits. In such cases, they will pay the applicable taxes without penalties. For instance, a firm that has been debited with 1,500 points will be able to avoid having its turnover recalculated by an incremental factor of 3, and pay the taxes it would pay normally if it opts to self-correct its books.
According to the provisions, inspectors will no longer have the power to determine that firms’ books are not in order and calculate taxable income on the basis of predetermined rates of net profit per activity. The bill provides for regional, three-member, tax arbitration committees that will include traders’ representatives and consider disputed cases. Inspectors found guilty of dereliction of duty in applying the new system will be liable to prison sentences of up to one year.
The new “objective” system is expected to release resources for the more effective tax monitoring of larger enterprises, for which it will not apply. This includes listed firms and those with an annual turnover of more than 30 million euros, which now must undergo compulsory annual inspections, and aims to eliminate the phenomenon of the large number of uninspected fiscal years and to boost the credibility of listed firms. In cases where violations are established through court adjudication, the predetermined incremental rates on net results are to be halved.
Other measures
The draft bill also provides for the full exemption of professional farmers from the transfer and inheritance taxes on farmland.
Private cars will no longer be taken as proof of income for tax purposes, except those whose factory price exceeds 50,000 euros, and consumption taxes on cars are waived for large families under certain conditions.
Students attending university away from their home town are entitled to annual stipend of 1,000 euros if their family income is less than 30,000 euros per year.
An annual benefit of 150 euros is provided for school students whose parents have been unemployed for more than six months, on condition that at least one parent is a Greek citizen.
Taxpayers in arrears with their tax obligations will be liable to prison terms if they delay payment: at least four months for sums more than 1,000 euros, at least six months for amounts of more than 50,000 euros and at least one year for more than 120,000 euros.
The government yesterday presented major tax incentives for companies planning large investments, including a preferential lower rate and the option of forming tax-free reserves for investment.
According to the draft bill unveiled by the Economy and Finance Ministry, firms investing more than 30 million euros in productive installations will be liable to a 25 percent tax rate on their net profits for 10 years, instead of the present 35 percent. Also, all enterprises are given the opportunity to form a tax-free reserve from their undistributed profits in the five years from 2004 to 2008. Up to 35 percent of undistributed profits may be channeled into the reserve and has to be invested within three years of its formation.
Point system
The draft bill also includes provisions for a radical departure from the present system of tax inspections and penalties for tax-code violations, aimed at simplifying and improving relations between tax officials and taxpayers by largely automating procedures. The new provisions, likely to come into force on January 1, replace fines with a point system whereby firms are centrally selected for tax inspection according a priority scale based on the number of punitive points for tax or customs offenses. A low number of points means a firm is placed on a list for possible greater probing, but a high number will lead to a reassessment of results and increments on the tax rates applicable.
The number of punitive points will depend, among other criteria, on the type of tax or customs violation, the firm’s size, financial and other data, and their sector of economic activity, reflecting differences in the incidence of offenses. Construction companies, for instance, will be debited with more points because the sector has a high incidence of violations.
The new system will apply to firms or professionals with a gross annual revenue of up to 30 million euros. Instead of fines, it institutes 11 tiers of points between one and more than 100,000, corresponding to incremental factors scaled from 0.5 to 20 which automatically raise a company’s or a professional’s gross revenue, thereby increasing the offender’s tax burden. Companies and professionals are given the opportunity to voluntarily report offenses within the fiscal year and to redo their books through internal audits. In such cases, they will pay the applicable taxes without penalties. For instance, a firm that has been debited with 1,500 points will be able to avoid having its turnover recalculated by an incremental factor of 3, and pay the taxes it would pay normally if it opts to self-correct its books.
According to the provisions, inspectors will no longer have the power to determine that firms’ books are not in order and calculate taxable income on the basis of predetermined rates of net profit per activity. The bill provides for regional, three-member, tax arbitration committees that will include traders’ representatives and consider disputed cases. Inspectors found guilty of dereliction of duty in applying the new system will be liable to prison sentences of up to one year.
The new “objective” system is expected to release resources for the more effective tax monitoring of larger enterprises, for which it will not apply. This includes listed firms and those with an annual turnover of more than 30 million euros, which now must undergo compulsory annual inspections, and aims to eliminate the phenomenon of the large number of uninspected fiscal years and to boost the credibility of listed firms. In cases where violations are established through court adjudication, the predetermined incremental rates on net results are to be halved.
Other measures
The draft bill also provides for the full exemption of professional farmers from the transfer and inheritance taxes on farmland.
Private cars will no longer be taken as proof of income for tax purposes, except those whose factory price exceeds 50,000 euros, and consumption taxes on cars are waived for large families under certain conditions.
Students attending university away from their home town are entitled to annual stipend of 1,000 euros if their family income is less than 30,000 euros per year.
An annual benefit of 150 euros is provided for school students whose parents have been unemployed for more than six months, on condition that at least one parent is a Greek citizen.
Taxpayers in arrears with their tax obligations will be liable to prison terms if they delay payment: at least four months for sums more than 1,000 euros, at least six months for amounts of more than 50,000 euros and at least one year for more than 120,000 euros.
3287.99
1275.09