The billions of euros the state coffers miss out on
Greece’s tax policy has become a field of fierce confrontation between the political parties. Politicians are clamoring for reductions or increases in taxes on parental gifts, dividends and VAT on products. But what they’re not saying is that the country urgently needs a bold tax reform that will undo decades of ills and broaden the tax base.
A look at some of the data recently published by Kathimerini clearly reveals the problem: Taxes collected by the state are mainly paid by salaried employees and pensioners. Of the 360,000 self-employed in the country, 268,000 – 74% of the total – declare an annual income of up to 10,000 euros; which means they keep their business open by collecting 833 euros a month. That is, 50 euros more than an employee who is paid the minimum wage of 780 euros. Four out of 10 taxpayers, that is 2.5 out of 6.4 million, declared an income of 5,000 euros in 2022. That means those people live on 416 euros a month. At the same time, only 27,000 citizens, less than 0.5% of taxpayers, declare an income of more than 100,000 euros.
In most European countries about 50% of tax revenues come from indirect taxes and 50% from direct ones. In Greece, however, indirect taxation contributes close to 60% of tax revenues. Increasing indirect taxes has become the easy solution since tax authorities are failing to reduce tax evasion.
In Greece, tax dodging is estimated at 7 billion euros a year. While consumers pay the value-added tax to businesses, much of it ends up in the pockets of tax evaders, instead of being paid to the state. Some countries have dealt with this theft by, for example, connecting cash registers with the Finance Ministry. The measure has been discussed in Greece since 2012 but because governments do not want to turn against their “client-voters” – as a former prime minister described them to me – 11 years later it has yet to be implemented.
Portugal adopted this very measure in 2011, but we are still mulling over the political cost, while the state coffers lose out on billions of euros.
