Greece to levy 40 percent tax rate on more earners

February 8, 2010 10:40 AM EST

Greece will lower the current 75,000 euro income threshold that is subject to a 40 percent tax rate as part of reforms to urgently boost government revenues, the country's finance minister said on Monday.

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Greece's planned tax reforms are part of a deficit-reduction plan, endorsed by the European Commission, to return to fiscal health. The socialist government has said it wants to tackle widespread tax evasion and revamp the system to make it fairer.

Worries over Greece's fiscal woes have battered its bond and stock markets, driving its borrowing costs sharply higher and helping to drive the euro currency to 8-1/2 month lows against the dollar.

The tax reform bill is expected to be unveiled this week and become law by the end of the month.

"The 40 percent tax rate will be applied on income levels that are lower than what is the case today, but there will also be intermediate rates that will provide relief for low and middle incomes," Finance Minister George Papaconstantinou told Ta Nea newspaper in an interview.

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He said that as a result of the tax changes, the biggest burden would be felt by a small percentage of tax payers as 95 percent of earners report incomes below 30,000 euros a year.

"We are making a huge effort to protect our economy from speculation and a lack of credibility, which have led to adverse borrowing terms," Papaconstantinou told the paper.

"After the prime minister's announcements our most significant weapon is our consistency and effectiveness in implementing policies," he said.

(Reporting by George Georgiopoulos; Editing by Toby Chopra)