BUSINESS

Greek tax hike biggest in OECD

EIRINI CHRYSOLORA, PROKOPIS HATZINIKOLAOU

TAGS: Finance, Taxation

Greece has shifted from being one of the OECD countries with the smallest tax burden in 1965 to one of the countries with the heaviest taxation during the financial crisis, and so it continues.

The Organization for Economic Cooperation and Development’s Revenue Statistics 1965-2018 report shows that in 1965 Greece had tax revenues amounting to 17.1 percent of its gross domestic product, while the OECD average rate stood at 24.9 percent. Thirty years on, in 1995, Greece remained below the OECD mean rate of 31.9 percent, with a 25.2 percent rate.

In 2010, when Greece entered the bailout mechanism, Greece was right on the average for the 34 OECD member-states, with tax revenues amounting to 32 percent of GDP. Two years later, in 2012, the tax burden climbed to 35.5 percent, before edging up to 35.7 percent in 2014 and soaring to 38.7 percent in 2018.

That means that in the bailout period from 2010 to 2018, tax revenues rose by 6.7 percentage points of GDP. This makes Greece the only country that has placed such an additional burden on its taxpayers, while the average rate for OECD countries stood at 34.3 percent in 2018.

The reduction of the tax-free threshold from 12,000 euros to 5,000 euros in 2011, before its increase to 8,636 euros later on, was instrumental in the increase of the burden. In direct taxation, the income tax rates for individuals and corporations were adjusted, the majority of tax exemptions were abolished and an additional solidarity levy was imposed. Many of the tax measures were drafted and implemented under huge pressure from the country’s creditors, without the necessary analysis of their collection efficiency or of the financial impact.

On top of that, there were indirect taxation hikes, mainly implemented by the previous government, with the shift of many food commodities and services from the low to the medium bracket of value-added tax. According to the OECD report, indirect taxes account for the greatest share of the sum of tax revenues in Greece.

Online