ATHENS (Reuters) - Greece will tax capital gains on shares next year as part of efforts to boost revenues and attain a primary budget surplus, a tax reform bill Athens had long-promised its international lenders showed on Thursday.
The European Union and International Monetary Fund have pressed the cash-strapped country to reform a tax administration widely seen as corrupt and ineffective in combating tax evasion, part of demands to unlock financial aid.
Based on the draft legislation submitted to parliament, Greece will raise the tax rate on corporate profits to 26 percent from 20 percent but lower the tax on distributed dividends to 10 percent from 25 percent currently.
Capital gains from stock trading on the Athens stock exchange will be subject to a 20 percent tax from April next year, while interest income from bank deposits will be taxed by a higher 15 percent rate versus 10 percent currently.
"The proposed legislation is part of wider plans to create a just and effective tax system, reorganise the tax collection mechanism and apply a stricter framework against tax evasion," the finance ministry said.
The bill reduces the current eight tax brackets to three, imposing a 42 percent top rate on incomes above 42,000 euros (34,000 pounds). Currently, a 40 percent tax rate applies to those earning over 60,000 while incomes over 100,000 are taxed at 45 percent.
Wage earners and pensioners earning up to 25,000 euros will be taxed at 22 percent. Incomes above 25,000 and up to 42,000 will be taxed at 32 percent.
Rental income up to 12,000 euros will be taxed at 10 percent. Above this threshold the tax rate will be 33 percent.
The tax reform will do away with many tax exemptions, including part of the interest paid on home loans and insurance outlays. But there will be relief for those earning up to 21,000 euros a year -- a 2,100 euro tax credit.
For incomes above 21,000 euros, the tax credit will come down by 100 euros per each 1,000 euros of income until it is exhausted.
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 Greece passed last month to comply with the terms of its bailout.
Speculation in the Greek press 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, had deepened anger among a public worn down by five years of recession.
Earlier this month Prime Minister Antonis Samaras was forced to dismiss talk that his government had such plans in an effort to bridge differences among his ruling coalition.
(Reporting by George Georgiopoulos)