Cuts in public spending and investment helped reduce Greece's central government budget deficit by 34 percent for the January-August period from a year earlier though tax collection is underperforming, Finance Ministry data showed on Tuesday.

Hit by austerity-fueled recession, Greece is struggling to meet its fiscal obligations under the terms of a bailout arranged by the European Union and International Monetary Fund.

The budget gap fell to 12.4 billion euros ($15.9 billion) from 18.7 billion in the same period last year.

Yet net government revenue rose by just 1.6 percent to 33.1 billion euros, 2.1 billion euros lower than an interim target set out under the bailout plan.

Thousands of Greeks failed to pay the first tranche of their income tax by August 31, resulting in a shortfall of 270 million euros of tax revenue, a government source told Reuters.

In a bid to make up the shortfall, the Finance Ministry is cracking down on tax dodgers, saying last week it had seized assets worth «dozens of millions of euros» in shares, deposits, cars and houses.

Greece is also seeking a tax accord with Switzerland to tap undeclared cash worth billions of euros which rich Greeks are believed to have stashed in banks there.

This is expected to be combined with a tax amnesty on those who voluntarily reveal their income.

Separately on Tuesday, the Finance Ministry reminded the country's banks that they owed the state a total 555 million euros in dividend payments.

This stems from preferred shares which the state bought in the banks as part of a support scheme after the global financial crisis of 2008.

Yet the banks, whose capital has been wiped out by the country's debt crisis, stand no chance of paying up before they are recapitalized as part of the bailout.

Unlike the general government budget gap, which the EU uses to assess Greece's fiscal performance, the central government budget deficit data excludes local authorities and social security spending. [Reuters]