Stress Testing the Effect of Income Tax Scale on a Full Time Agricultural Income in Greece After the New Tax Legislation

Abstract

The main purpose of this paper is to identify and point out changes in the tax burden on farm income given the new tax legislation of 2016 according to which the farm income has the same tax treatment as the rest of the professionals. The paper initially presents the key determinants of tax burden through the latest tax legislation, like the new tax scales, and the relative tax rates of each scale. Furthermore, it presents a theoretical model regarding an indicative Gross Revenue and a Cost Index of a full-time farmer. By choosing to apply Monte Carlo Simulation with the Pert Distribution as analyzed below; we use @ Risk software to stress the tax parameter of Tax Scales, with intervals of ±10%, to identify how the parameter, has influenced the tax burden of farm income. From the findings we can conclude that tax scale has an abnormal effect to the tax burden of the Farm Income as the second and not the third scale has the most significant effect. As tax legislation evolves every one or two years it is important to point out that regarding farmers income the tax scale has a non-gradualnon-linear effect, which must be corrected to be more equal distributed along the income tax scales.