Tax evasion burns a hole in state budget

Instead of raising state revenues, as was intended, the increased demands on self-employed professionals in terms of taxes and social security contributions have resulted in increased tax evasion, confirming the Finance Ministry’s worst fears.

Data show that incomes declared earlier this year by self-employed professionals in their 2016 tax statements were down 20 percent on 2015’s, amounting to 3.8 billion euros against 4.7 billion a year earlier. The ministry believes some self-employed professionals have concealed part of their incomes in an effort to reduce the burden imposed on them. In several cases taxes and contributions add up to over 60 percent of earnings.

The negative development will not only have an impact on this year’s budget but future budgets too, which has generated concern at the ministry ahead of the third bailout review, especially given the International Monetary Fund’s view that Greece will not be able to achieve the target for a primary surplus of 3.5 percent of gross domestic product from next year.

The potential impact on state revenues has been estimated at more than 1.5 billion euros in the next couple of years, and among the ideas being considered to address this problem is setting a ceiling on the total amount that can be imposed in taxes and contributions.