Benefits system leading to spike in tax evasion

Government policy for subsidies and benefits for people on lower incomes, which in practice has no monitoring mechanisms checking declared incomes, is leading to an increase in tax evasion and failure to get resources to the people who need them most.

The allowances for children and housing, as well as reduced contributions toward pharmaceutical expenditure, the new method of calculation of social security contributions for professionals and the policy of protecting main residences from repossession and auction strengthen the motive for tax evasion.

Those interested in fooling the taxman could even go as far as bogus divorces, particularly when they fully understand the new system that will apply as of January 2019 – provided of course the state meets its fiscal targets for the so-called countermeasures to be activated as planned for that specific year.

Kathimerini has processed a realistic example which reflects the extent of the irrational system currently implemented: It has compared the actual financial situation of two freelance workers with two children each. The first, despite having an actual annual income of 25,000 euros, declares just 6,000 euros to the tax authorities, while the second declares his entire earnings.

After the deduction of taxes and social security contributions, and the addition of benefits and discounts, the net disposable income of the professional who does not declare his real income comes to 23,449 euros, while his law-abiding peer is left with just 8,769 to cover all his other needs after paying his obligations to the state. That means a tax dodger in Greece can enjoy net revenues of as much as 267 percent more than the honest taxpayer who normally earns the same over a year.

Furthermore, as things stand – regardless of the possible implementation of the government’s pledge to create more free-of-charge spaces for children at nurseries in the context of the countermeasures – the tax dodger will also secure a free slot at a nursery of his choice for his child through the Partnership Agreement for the Development Framework (ESPA). The law-abiding taxpayer would have to pay the normal cost of a private nursery, which is a minimum of 2,700 euros per annum.