Greece is the “champion” in indirect taxes

Thanos Tsiros, economic commentator of Kathimerini, in this publication offers his version of the reasons for the failure of the Greek government in relation to tax policy and to justify the high level of taxes in the country.

The pathogens characteristic of the Greek tax system, preventing its further consolidation, are still here. Progress made in recent years in reducing the burden on the self-employed or lowering insurance premiums was reflected in a recent OECD survey by a reduction in deductions from workers’ incomes by about two percentage points.

However, another OECD study shows that Greece is still dependent on extremely high indirect tax rates. excise tax on unleaded gasoline is twice the minimum tax in force in EU, excise for fuel oil is 14 times higher, and the base rate VAT (24%) is among the 3-4 highest in Europe.

The reason why the government is reluctant to “touch” these rates by helping alleviate an inflationary energy crisis is because low return on direct taxes in Greece.

Since 70% of taxpayers declare income below the non-taxable threshold, and two out of three professionals show lossespersonal income tax in Greece is 15% of total tax revenue, while the average for OECD countries is 23%.

The “hole” created by very low income tax returns is largely covered by excise tax. With an average excise duty rate in the OECD of 13% of total taxes, Greece expects the following indicators from fuel, tobacco products.

Hellas

OECD*

income tax for individuals

fifteen%

23%

income tax legal persons

6%

ten%

Insurance contributions

31%

26%

tax on real estate

eight%

6%

VAT

21%

twenty%

excises

19%

13%

In times of extreme inflationary pressures like the one we are experiencing, Greece’s “peculiarity” of being dependent on indirect taxation and especially indirect excise taxes is a major hurdle. The budgetary cost of a direct reduction in the excise tax could not be easily offset by either “curbing” fuel consumption or by increasing tax revenues from other sources, such as income taxes.

Intervening in indirect taxation was a government campaign commitment, but the pandemic, the energy crisis and now the war in Ukraine have narrowed the scope for intervention. Measures are now in demand to stimulate electronic transactions, as well as to increase the nominal wages of employees: on the one hand, to reduce tax evasion, and on the other hand, to increase the volume of declared income in order to expand the tax base, increase direct tax revenues and create conditions to reduce very high rates of indirect taxes, especially VAT.

By category of tax revenue, the disparities that still characterize the country are reflected in the following data:

  1. In personal income tax, Greece has a share of 15% versus 23%, which is the OECD average. The reason is the decline in income in recent years due to years of crisis, unemployment and widespread tax evasion, especially among the self-employed. With job creation, higher nominal wages, and “pressure” on receipts due to electronic payments, it is estimated that the huge gap separating the country from the OECD will “close” in 2022.
  2. Greece has a corporate income tax of 6%, compared to 10%, which is the OECD average. The reduction in the tax rate to 22% seems to have created an incentive to increase taxable material.
  3. Greece receives 31% of its total income from insurance premiums, compared to 26% in OECD member countries. From June 1, with a 0.5% reduction in the rates of additional insurance premiums for the employer and employee, the cumulative reduction will be 4.5%, so the gap will be reduced to this level.
  4. On property taxes, we are again above average (8% vs. 6%), but now the ENFIA cut has been launched, so a balance is expected.
  5. VAT, despite very high rates, returns the tax close to the average (21% versus 20%).
  6. A large imbalance is observed in excises: 19% versus 13% in OECD countries.

* OECD – Organization for Economic Cooperation and Development – an international economic organization of developed countries that recognize the principles of representative democracy and a free market economy. Wikipedia

See also taxes. “To pay or not to pay, that is the question”.



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