Tax evasion costs Greece 5 percent of GDP: EU tax chief

ATHENS - Reuters

Greek Finance Minister Stournaras (R) arrives for a Cabinet meeting in the Parliament. The country plans reforms in 2013 to combat tax evasion. EPA photo

Greece could generate budget revenues amounting to 5 percent of national output annually if it reforms tax collection and clamps down on tax cheats, the European Union’s tax chief told a Greek newspaper.

Athens plans reforms next year to combat rampant tax evasion as it struggles to shore up public finances and achieve a primary budget surplus, both necessary to continue receiving bailout aid from international lenders.

The eurozone agreed Dec. 13 to provide nearly 50 billion euros in long-delayed aid to Greece, averting a catastrophic default and securing its survival in the zone after months of doubt and political turmoil.

Highest level in EU

Experts estimate that a shadow economy lying outside Greece’s tax system amounted to more than a quarter of annual output in 2011, the highest level in the European Union.

It is common in the country for small business owners to under-report sales and pay lower value-added tax. The self-employed such as plumbers and electricians often get paid in cash, avoiding receipts. “According to our estimates at the Commission, out of the 53 billion euros in (overdue) taxes owed to the Greek state, 15 to 20 percent could be collected,” EU tax commissioner Algirdas Semeta told newspaper Kathimerini in an interview. He said the country’s tax system needed an overhaul with simple and easily applicable rules.

A bill introduced to boost state revenues is due to scrap many tax exemptions and raise tax rates on property, companies and households with above-average income. The government also plans a tax on capital gains on stocks traded on the Athens stock exchange. The measures are expected to increase tax revenues by about 2.5 billion euros in 2013-2014.

Speaking to a medical conference on Dec. 15, Greek Finance Minister Yannis Stournaras said the government would complete tax reforms in coming months so that all Greeks contribute to saving the country.

He cited 2011 tax data revealing that half of the self-employed reported annual incomes of up to 5,000 euros, showing the biggest tax burden fell on wage earners and pensioners.