Greek Prime Minister Announces €1.6 Billion Tax Cuts Package

Greek Prime Minister Kyriakos Mitsotakis announced a comprehensive tax cuts package worth 1.6 billion euros (approximately $1.87 billion) on September 9, 2023. The initiative aims to benefit around 4 million citizens, targeting middle-class families, young people, large families, and pensioners. This announcement took place during his keynote address at the Thessaloniki International Fair, an event where the Prime Minister traditionally outlines the government’s economic policies for the upcoming year.

Mitsotakis’s speech marked a significant departure from last year’s address, where he stated, “I have not come with a bag full of gifts.” This year, the focus shifted to proposals intended to enhance disposable incomes amidst rising inflation, particularly in essential areas such as food. The Prime Minister is aware of the approaching national elections, which must occur by July 2027, and the tax cuts appear strategically designed to appeal to voters.

The tax cuts, while constrained by European Union spending regulations, are supported by better-than-expected tax revenues and a primary budget surplus. This surplus excludes debt servicing costs, allowing for the implementation of these measures in the 2026 national budget, which Parliament will vote on in December.

Under the new plan, all tax rates, except the lowest bracket of 9% and the top rate of 44%, will see a reduction of 2 percentage points. A new tax rate of 39% will be introduced for incomes ranging from 40,000 euros to 60,000 euros (approximately $46,800 to $70,200), which currently fall under the highest tax category. Moreover, individuals under the age of 25 earning less than 20,000 euros (about $23,400) will be exempt from income tax, while those aged between 25 and 30 will face significantly reduced tax rates.

In a bid to address income disparities, rental income earners will also experience substantial tax reductions, although Mitsotakis acknowledged that reported incomes from this source are often quite low. Furthermore, residents of small islands with populations under 20,000 will benefit from a 30% reduction in value-added tax, while property taxes for village residents will decrease over the next two years.

In addition to tax relief, the government plans to tackle housing shortages, partly by constructing apartments on former military bases. Wage earners and pensioners can expect to see the effects of these changes reflected in their pay slips starting January 2026.

The overarching goals of these tax cuts are to increase disposable incomes in light of ongoing inflation and to address Greece’s demographic challenges. The country currently has a birthrate of 1.4 children per woman, well below the replacement level of 2.1. If this trend continues, Greece’s population, currently at 10.2 million, could decline to under 8 million by 2050. As of 2021, Greece had one of the highest median ages globally at 44.7 years.

Mitsotakis emphasized that Greece remains dedicated to fiscal stability despite global economic uncertainties, stating, “tariff wars shake whole economies.” In typical fashion, the announcement sparked protests, with participants voicing differing opinions on government policies. According to police reports, the number of protesters increased from under 7,500 in 2024 to over 16,000 this year, with demonstrations largely remaining peaceful. Among the protesters were union representatives and activists supporting Palestinian rights.

The Prime Minister’s announcement reflects a significant moment in Greece’s economic landscape, with potential implications for both the immediate future and the upcoming electoral cycle. By targeting various demographics, the government aims to stimulate economic growth and address pressing social issues.