Greece is defying the prevalent trend among the world’s industrialized nations for reducing tax rates in order to boost investment and competitiveness, a report published on Wednesday by the Organization for Economic Cooperation and Development (OECD) has shown.
According to the report, in contrast to the majority of OECD member states, Greece has raised taxes and social security contributions as government policy is geared toward reaching fiscal targets, even though this inevitably harms the crisis-hit country’s competitiveness.
After the initial phase of the global financial crisis and the tendency to raise taxes and reduce spending in order to bolster revenues, the majority of OECD countries introduced growth-driven tax reforms. Greece may be among the European Union countries that have introduced radical tax reforms – along with Austria, Belgium, Hungary, Luxembourg and the Netherlands – but it is also the only one among them that increased taxes on labor and corporate profits.
It is worth noting that in the 2014-2015 period, 25 of the 32 countries for which data is available recorded an increase in tax-to-GDP levels. The report by the Paris-based organization mentions Greece as an exception to this trend as well, noting that the country was in recession in that two-year period.
In regards to corporate tax competition, eight OECD member states reduced rates in 2017 on an average of 2.7 percent, with Hungary slashing the rate to just 9 percent.
Between 2008 and 2016, Japan reduced corporate taxes by 10 percentage points from 39.5 percent and the UK from 28 percent to 20 percent in that same period. Finland, Spain, Slovenia and Sweden reduced corporate tax rates by 5-6 percentage points, in stark contrast to Greece, which together with Chile and Portugal, has the highest corporate tax rates in the OECD compared to 2008.
Many countries also offered breaks and reductions on income tax, particularly in the lower brackets, with Austria, Belgium, Hungary and the Netherlands also cutting social contributions in 2015-2016. Not so Greece, which in 2016 raised both, thereby increasing the overall burden on low-income earners by 1.5 percent.
Greece was also the only country in the OECD to raise value-added tax rates in 2016.