Greek growth’s death by taxes
Disproportionately high taxation encourages illegal economy and evasion, and creates excessive surpluses
European Commissionstatistics point to the disproportionate increase in taxation in Greece, at a time when the economy was shrinking, while the country’s industrialists and political opposition say overtaxation has led to more tax evasion and the failure of the tax system.
Data included in the fall forecasts of the Commission show that direct taxation on income and wealth has risen to 10.2 percent of the country’s gross domestic product this year, from 9.4 percent of GDP in 2009. Given the dramatic contraction of the country’s GDP over the last eight years, the load on taxpayers is excessively heavy.
According to the report, the taxes Greeks are asked to pay this year on income and wealth add up to 18 billion euros, against 20.3 billion in 2009, while taxes on output and imports have risen to 31.7 billion from 27.8 billion euros eight years ago.
Brussels expects the primary surplus to beat its target of 3.5 percent of GDP again next year, rising to 3.9 percent, and then to 3.7 percent in 2019, as a result of the overtaxation.
On Thursday the Hellenic Federation of Enterprises (SEV) again repeated that the excessive taxation only serves to increase tax evasion and “kill off” growth, asking for taxes to start decreasing immediately after the end of the bailout program next August, so as to boost economic activity.
The tax system has failed, as today Greece has an illegal economy estimated at 40 billion euros, tax evasion of 12 billion and a disproportionately high number of low declared incomes, claims Stelios Petsas, a fiscal policy adviser to New Democracy leader Kyriakos Mitsotakis.
Addressing a tax forum in Athens yesterday, he added that the reduction in the value-added tax gap was 734.12 1.1654 reversed in 2015, showing that increasing taxes fetches the opposite results, and that this is a vicious cycle that should be broken.
Petsas said the expansion of the taxpayer base along with tax cuts will bring about an increase in collection rates. This, together with the write-off of non-collectable debts and the statute of limitations for old cases that are at least five years old are the first priorities of New Democracy.