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New Greek reforms explained

May 9, 2016

Greek lawmakers have voted to overhaul the country's tax and pension systems. The reforms are deeply unpopular, as Athens will be reaching deeper into the pockets of ordinary Greeks. Here's a look at what got passed.

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Griechenland Generalstreik Demonstration in Athen
Image: Reuters/A. Konstantinidis

It was a tight vote on Sunday, but a majority of Greek parliamentarians gave the green light to collect more taxes and spend less on retirees. They also affect social security payments.

Here are the key points of the reforms, which were necessary to unlock further bailout money under a deal Athens hashed out with its international creditors last year.

Pensions

· Standardize Greece's pension scheme by introducing unified retirement rules.

· Introduce a national pension of 384 euros ($437) per month.

· Cut supplementary pensions, which are paid out on top of statutory state pensions.

· Gradually phase out stipends for low-income pensioners who struggle to make ends meet.

· Recalculate pensions in general.

· Tighten rules for legacy pensions, or money that is paid out to a deceased person's surviving dependants.

· Set a goal of curbing early retirement.

Social security

· Set social security contributions at 20 percent of an employee's net income, although the burden is shared between employers, who will pay 13.3 percent, and employees, who will pay 6.7 percent.

· Freelancers will also be forced to divert 20 percent of their income to social security - a departure from a fixed monthly amount they currently pay.

Taxes

· Lower the threshold for tax-exempt incomes to 8,800 euros a year from around 9,500.

· Adjust the lowest income tax bracket so people earning more than 20,000 euros pay 22 percent. Before, you had to earn at least 25,000 euros a year to pay 22 percent.

· Reserve the highest income tax bracket for people whose gross incomes exceed 40,000 euros a year and make them pay 45 percent. That compares to the 42 percent on income above 42,000 that previously existed.

· Raise the dividends tax to 15 percent from 10.

· Adjust the so-called "solidarity levy," which was introduced in 2012 to help jobless Greeks. People earning between 12,000 and 20,000 euros a year will now pay 2.2 percent; people earning up to 30,000 will pay 5 percent; up to 40,000, 6.5 percent. Anyone whose yearly earnings are higher than 220,000 euros will pay 10 percent.

cjc/hg (Reuters, dpa)

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