BUSINESS

Annual VAT lost at around 5-6 bln

PROKOPIS HATZINIKOLAOU

TAGS: Taxation, Finance

Greece’s annual value-added tax losses are roughly equal to the latest package of austerity measures (of 5.4 billion euros), according to European Commission data on the VAT deficit across the European Union, which adds up to 159 billion euros per year.

In the period from 2000 to 2014 Greece has missed out on VAT revenues that come to some 90 billion euros, corresponding to about 30 percent of the country’s debt.

The figures released on Tuesday showed that in 2014 Greek state coffers lost out on 4.93 billion euros, as they received 12.67 billion from a potential 17.6 billion, i.e. a loss of about 28 percent. In 2014 Greece actually managed to contain VAT evasion from 6.3 billion euros in 2013 (or 34 percent), partly thanks to reducing the VAT on food service from 23 percent to 13 percent from August that year.

The data make it clear that the increase in VAT rates does not just fail to bring more revenues to the state but also expands tax evasion, as many enterprises simply stop issuing receipts in order to keep prices low.

Greece ranked fifth among the EU’s 28 member-states in terms of VAT losses, with its figure being three times as high as the bloc’s national average.

Since the country resorted to a bailout, its has engaged in five VAT rate hikes but without securing any significant revenue increases. Commission data show that the VAT deficit is not only related to cheating but also to other issues such as corporate bankruptcies, statistical errors, payment delays, etc.

One of the reasons the country’s creditors insist on the increase to the exemption of enterprises from VAT payment if their gross revenues are up to 25,000 euros per annum (from 10,000 euros nowadays) is the huge amount of tax evasion recorded. They argue that this way the administrative costs related to the smaller companies’ compliance will be reduced, while increasing those firms’ competitiveness in comparison with the major enterprises.

Online