[InTime News]
Greece is included in the list of European countries exposed to the risk of the so-called “fiscal drag” – i.e. the phenomenon of a faster percentage increase in the tax burden compared to the change in nominal income.
It will likely remain on it, as the “medicine” – the indexation of the tax brackets – comes at a fiscal cost currently considered unbearable for the budget. Therefore, another one will be added to inflation’s effects on family budgets: the constant increase in income tax due to nominal hikes in wages and pensions.
The Tax Foundation has Greece among countries that do not automatically adjust their tax rates based on changes in inflation. Rate changes are expected to limit the tax burden, especially for middle incomes and families with children. However, permanent indexation is not expected, as it would commit fiscal space perpetually and at an accelerating pace.