Families pay unduly high tax

Households with children are disproportionately burdened in Greece, OECD data illustrate

Greece imposes a higher income tax on all types of households than most countries in the world and of course the OECD average. Yet the greatest distance is recorded – higher than 10 percentage points – in families with children, especially in those with the lowest family income.

The finding is prompting a review of both the conditions for benefits and income tax relief for families with children, with the government expected to announce its final decisions after the summer, as part of its national demographics plan.

Given the fiscal conditions – this year and next year there is little scope for the implementation of more measures, beyond those already announced – any decisions should be “fiscally neutral,” which means that there may be winners, but also losers, through the redistribution of resources.

The findings from the annual survey by the Organization for Economic Cooperation and Development on taxing salaries clearly reveal the less favorable treatment of taxpayers with children in Greece compared to other countries. A typical example concerns the poorest type of household, the one that receives 67% of the average income of the country. In Greece, this amount corresponds to a salary of around 900 euros net, but that includes the allowances provided by the legislation for families with children.

Therefore, a single worker's deductions (including employer contributions) come to 34.5% of income. For the same category of workers, the average rate in the OECD is 31%, so the difference is limited to 3.5 percentage points. However, if the same worker has two children and the same income ratio, he will clearly have less deductions, amounting to 28.5%, but among OECD states the average rate of deduction is just 16.5%.

Consequently, the gap between Greece and the OECD average rate widens to 12 percentage points and the Greek worker with two children jumps to fifth place in the OECD ranking of member states with the highest burden on households with children, far from the rest of the European South.