The Haratsi Is Here To Stay



ppcbill_390_1311-300x1861A special property tax levy that doubled the amount due, and which was put into electricity bills in 2011 – for what was supposed to be a one-year only payment – will be rolled into a single package with the primary bill and continued and is likely to be increased again, putting a heavier burden on Greeks already buried under three years of unrelenting austerity measures.

The so-called “haratsi,” a scornful tag from taxes during the Ottoman Occupation, was introduced in 2011 by then finance minister Evangelos Venizelos, the PASOK Socialist leader who jumped at the chance to become Deputy Prime Minister and Foreign Minister with his party fading fast in the polls. He joined Prime Minister and New Democracy leader Antonis Samaras’ coalition government to give it a majority in Parliament.

When the haratsi was put into property tax bills it came with a condition that it must be paid or homeowners would have their power turned off. The new unified tax means that homeowners in areas with official valuations of more than 2,000 euros ($2,600) per square meter will pay higher taxes in 2014, but those in less expensive areas will have their burden lightened, according to the latest rates approved by the Troika, but that all rates will be increased if the country fails to meet its fiscal targets demanded by international lenders, as it almost always has.

As it is also moving to let banks foreclose on homes if people can’t afford to pay their mortgage, the government said it’s also considering confiscating properties of people who can’t pay the state.

The Finance Ministry’s planned single property tax will be calculated on the basis of 33 zone rates which will be scaled from 2 euros/sq.m. for properties in areas with valuations up to 500 euros/sq.m. to 23.10 euros/sq.m. in areas where valuations exceed 8,500 euros/sq.m.The final amount to be paid will result from a multiplication of the respective valuation rate by the area of the property by its age coefficient.

The total to be paid by property owners in 2014 has been set at 4.15 billion euros, some $5.5 billion. Even in areas with valuations below 2,000 euros/sq.m. owners will have to pay more if their assets include undeveloped land or farm plots, as these are being taxed for the first time. The respective land rate is seen ranging between 10 and 600 euros per hectare, which is about 2.47 acres.

Everyone will have to pay as there will be no threshold for exemption from the tax but the long-term unemployed and those earning incomes below the poverty line will not be liable to pay. The changes will be included in a draft bill to be prepared by the beginning of September and which will be subject to negotiation with the Troika which has already said it wants the tax kept.

Besides the single property tax that will integrate all existing dues – such as the emergency property tax collected via electricity bills and the Real Estate Tax – which will come into force next year, the bill will also provide for the abolition of the property transfer tax. Changes in existing provisions regarding inheritance taxes and parental transfers cannot be ruled out and are likely targets of the state to get into taxpayers’ pockets again.

Despite all those higher property taxes, that come along with big pay cuts and slashed pensions and with record unemployment and many banks pushing for customers to pay their bills in full without restructuring loans and mortgages, the government is also reportedly going ahead with a plan to let even primary homes be foreclosed upon and seized if people can’t afford to pay.

The taxation base is being extended to commercial, industrial and farm properties, which will shoulder an estimated 25-30 percent of the total burden and which farmers said will hurt the country’s agricultural base, one of its most important export-drivers.

As a large number of properties built in the past have not been declared to the inland revenue department, the Finance Ministry plans to use the records of the Public Power Corporation (PPC) to identify their owners. Sanctions for nonpayment will include confiscation of properties. The new tax is set to run for three years and then revised.