The vi­cious cy­cle of Greece’s tax sys­tem

Need for more tax­a­tion feeds tax dodg­ing, which cuts rev­enues, which in­creases the need for more tax­a­tion

Kathimerini English - - Focus - BY PROKOPIS HATZINIKOLAOU

The ex­ces­sive tax­a­tion of tax­pay­ers and busi­nesses in the last few years has led to a vi­cious cy­cle: Tax eva­sion is grow­ing, taxes are in­creas­ing and rev­enues are drop­ping. One re­sult of this is that just 1.6 per­cent of tax­pay­ers, or 120,000 peo­ple, have to pay 2.7 bil­lion eu­ros or al­most 30 per­cent of to­tal in­come tax.

Ac­cord­ing to a sur­vey by Dia­neo­sis, the Greek state misses out on 16 bil­lion eu­ros ev­ery year, which would amount to 32 per­cent of the an­nual state rev­enues.

The in­ef­fi­ciency of the tax col­lec­tion mech­a­nism, over­tax­a­tion, and Greece’s com­pli­cated leg­is­la­tion, with thou­sands of laws, de­ci­sions and cir­cu­lars, are the main rea­sons why tax dodg­ing keeps grow­ing in spite of the tough mea­sures en­acted in the years of the cri­sis. The Dia­neo­sis sur­vey at­tributes the above fac­tors to the tax pol­icy and the gen­eral po­lit­i­cal en­vi­ron­ment in the coun­try, while also point­ing to the ab­sence of gen­uine po­lit­i­cal will in com­bat­ing the phenomenon.

The im­pres­sive data col­lected by the As­so­ci­a­tion of Ad­min­is­tra­tive Judges show that from 1975 to 2015, Greece passed 250 tax laws and amend­ments, along with some 115,000 min­is­te­rial de­ci­sions. In the last 30 months alone, Par­lia­ment has ap­proved six purely tax laws with 177 ar­ti­cles, and an­other 17 laws that in­cluded 71 tax clauses. For those clauses, 111 min­is­te­rial de­ci­sion and 138 ex­plana­tory cir­cu­lars were is­sued.

The Dia­neo­sis re­port showed that the num­ber of tax­pay­ers declar­ing in­comes around the taxfree thresh­old of 12,000 eu­ros per year amounted to 49 per­cent of Greeks in 2011, and they paid 1 per­cent of taxes. In 2014, the share of tax­pay­ers at that in­come level rose to 68.9 per­cent, pay­ing 11 per­cent of taxes.

In 2011, about 43 per­cent of tax­pay­ers de­clared in­comes of be- tween 12,000 and 42,000 eu­ros and their tax pay­ments ac­counted for 30 per­cent of all tax due. An­other 8 per­cent de­clared in­comes of more than 42,000 eu­ros and paid 69 per­cent of to­tal taxes, while three years later those earn­ing over 42,000 eu­ros dropped to 1.6 per­cent and paid 29.5 per­cent of taxes.

A key con­clu­sion stem­ming from these fig­ures is that the cri­sis has made tax­pay­ers’ in­comes shrink con­sid­er­ably and that over­tax­a­tion has sent tax eva­sion soar­ing.

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