Greece to raise tax on businesses, middle incomes-finmin source

ATHENS, Dec 6 (Reuters) - Greece plans to tax businesses and

middle incomes more in an effort to raise revenues from a tax

reform bill it has long-promised its international lenders, a

senior finance ministry official said on Thursday.

The European Union and International Monetary Fund have

demanded the cash-strapped country reform a tax administration

widely seen as corrupt and ineffective before they disburse

about 9 billion euros ($11.7 billion) in aid early next year.

But Greece has so far failed to make real progress and

disagreements over who should be taxed and by how much has

created a rift in Prime Minister Antonis Samaras's coalition

government, a mix of leftists and conservatives.

The finance ministry plans to raise the corporate tax rate

on profits to 26 percent from 20 percent, said the official, who

declined to be named. In dividends, the rate would fall to 10

percent from 25 percent currently.

The ministry's proposals include reducing tax brackets to

three from eight and imposing a 40 percent top rate on incomes

above 40,000 euros. Currently, the 40 percent tax rate applies

to those earning over 60,000 annually and those earning over

100,000 euros are taxed at 45 percent.

"The new tax system is simpler, fairer and geared toward

growth," the official said.

The proposals offer some relief to low incomes, as tax

exemptions for wage earners and pensioners would be increased to

9,000 euros from 5,000 euros currently for those earning up to

25,000 euros.

Greek press had speculated that the government planned to

apply a 45 percent top tax rate on incomes above 26,000 euros

and abolish tax credits for dependent children, deepening anger

among a public worn down by five years of recession.

On Tuesday, Samaras was forced to dismiss talk that his

government had such plans in an effort to bridge differences

among his ruling coalition.

The new tax system must generate about 1.1 billion euros of

additional revenues from 2014, as part of a 13.5 billion euro

austerity package that Greece passed last month to comply with

the terms of its bailout.

Samaras has held several rounds of talks with finance

ministry officials and Finance Minister Yannis Stournaras was

meeting party negotiators on Thursday to discuss the bill before

releasing it for public consultation.

Samaras's coalition allies have threatened to block the deal

in parliament, saying it would further strain honest taxpayers

instead of cracking down on wealthy tax evaders.

"We want our country to fulfill its obligations (towards

lenders)" the leader of the co-ruling PASOK socialists,

Evangelos Venizelos, said on Thursday.

"But this cannot happen at the expense of wage earners and

pensioners, at the expense of children, at the expense of the

young unemployed and the self-employed," he said.

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