BUSINESS

Overtaxation sapping Greece's prospects, business federation warns

PROKOPIS HATZINIKOLAOU

TAGS: Economy, Business

Greece is a rare case of a European country that taxes employment as aggressively as property, the Hellenic Federation of Enterprises (SEV) says in a special report which emphasizes that taxation is a huge disincentive to both employers and workers.

According to SEV’s report, for a worker to receive 40,000 euros net, an employer in Greece must pay out 100,000 euros, with 60,000 euros going to the state. The burden is high for lower salaries too. To offer a worker a 20,000-euro salary, an employer must pay another 15,750 euros in taxes and social security contributions. That is a tax rate of 44 percent – one of the highest in the European Union, with only a handful of countries imposing a higher levy.

Overtaxation has struck the Greek middle class particularly hard, particularly in the private sector, SEV notes. As a result, the most productive members of the working population are obliged to either put up with low salaries or emigrate, the report says.

The crisis years, which saw a barrage of tax increases, have led to fewer and fewer people pocketing higher-than-average salaries. In 2009, the year before the debt crisis erupted, 527,000 people took home an annual income in excess of 30,000 euros, with the figure dropping to 275,000 in 2014 and 239,000 in 2017.

Imposing relatively high rates, Greece collects the equivalent of 16 percent of gross domestic product in tax revenue, while other EU countries collect an average of 5 percentage points more in revenue while imposing a smaller tax burden on the employee.

Moreover, bemoaning what it describes as an unstable and unpredictable tax framework, the report notes that less than 500 companies, which have profits of more than 3 million euros, pay more than 50 percent of the corporate tax.
The report’s analysts claim that this demonstrates the scale of revenues lost by the state due to the strategy of overtaxing workers, businesses and shareholders.

“If more companies in our country managed to grow, the state’s revenues would be significantly increased,” the report said.

“Medium-sized businesses that do not grow, investments that are discouraged, workers that are not hired or are not rewarded with a wage increase, and the profits that are not achieved deprive the state [of more revenues in the long term] than what it collects in the short term through overtaxation,” the report added.

According to SEV, the return to market profitability is coming about primarily as a result of the consolidation of the balance sheets of the largest companies. This however only demonstrates the lack of dynamism among smaller companies.

Furthermore, despite the planned gradual decrease of corporate tax from 29 to 25 percent by 2022, the total tax burden on profits and distributed dividends remains very high compared to other European countries, especially if the solidarity tax and social insurance contributions are factored in.

The report said that the real estate market has also suffered in recent years due to overtaxation. This, it said, has led to a decline in investor interest and, as a result, Greece has lost revenues from transaction taxes equivalent to at least 0.5 percent of GDP. A further blow was dealt by the overtaxation of property owners.

Online