Tax system propped up by just 1 in 5
Study finds Greek taxation characterized by considerable inequalities, distortions and evasion incentives
The Greek tax system is full of inequalities, distortions and favored parties, according to a report presented on Monday that the Foundation for Economic and Industrial Research (IOBE) had commissioned from nongovernmental organization Dianeosis.
Notably, one-fifth of all taxpayers (20 percent) declared over half (53 percent) of the total sum of Greeks’ incomes in 2015 and was asked to pay 80 percent of the total tax on individual taxpayers, the study showed. That is due to the narrow tax base and the extensive tax evasion that effectively violate the principle of equality for people with the same taxpaying capacity, either due to different rates and exemptions in the law or tax dodging.
The survey showed that 71 percent of freelance professionals and 93 percent of farmers declare incomes of less than 9,000 euros per annum, which highlights the distortions of the tax system.
Among the findings of the survey are that extraordinary indirect taxes soared 94 percent in the eight years to 2016 and revenues from property taxation increased sevenfold, tax on output grew to 16.1 percent of gross domestic product in 2015 from 12.7 percent in 2009, and Greece currently lies third among the European Union members in terms of social security contributions.
The report stresses that the changes to the tax system from 2009 to 2016 were extensive, as there were increases in tax rates and adjustments to several other tax parameters. As regards direct taxation, income tax rates were adjusted, most exemptions abolished and the additional “solidarity levy” was imposed.
Many of the tax measures were planned and applied under great pressure, to a very tight schedule and without the necessary analysis of their collection efficiency and their economic repercussions.
Analysts highlighted that the high tax rates on individuals and businesses generate serious distortions, alienating incentives for labor, investment and business activity. Also they encourage tax evasion and fail to promote economic efficiency.
In 2016 the net burden on Greeks from income taxes and social security contributions ranged from 19.2 to 32.4 percent, against an OECD average of 15.2 to 30.8 percent.