Taxes make Greeks think there is no point working any harder

Taxes make Greeks think there is no point working any harder

This year’s income tax notification have come as a shock to medium- and high-income taxpayers, but the Finance Ministry is also suffering a shock from the reduced state revenues, coming after a year of 1.4 percent economic growth that ended a series of years of recession for the Greek economy. All this points to lingering distortions in the tax system that are not only punishing for households but also threaten enterprises.

A case in point is a taxpayer with the initials I.S. who managed to increase his income by 7,551 euros in 2017, from the year before, and is now asked to pay 6,982 euros of that. This means he will only be able to pocket 586 euros of his additional earnings, so it should hardly be surprising if he concludes that there is no reason for him to work any harder, as the taxman is snatching away 92.4 percent of his additional income.

A study of I.S.’s tax clearance form reveals that 64.5 percent of his income is heading to the tax authorities, not including social security contributions. Unfortunately next year is set to be even worse, as the contributions will be calculated against 100 percent of incomes instead of the current rate of 85 percent.

However, the ministry is also sorry to discover a drop in takings from individuals and businesses. Tax evasion and the termination of business activity by thousands of self-employed professionals are the main reasons why budget revenues are diminishing.

After processing 6 million income tax declarations, and with fewer than 300,000 left for the process to be completed, taxes amounting to 2.7 billion euros have been demanded, compared to some 3.5 billion in 2017 and 2016.

This will be the third consecutive year when the Independent Authority for Public Revenue will record a decline in the average tax due per statement: From the 1,630 euros that was the average tax due per declaration in 2016, there was a decline to 1,492 euros in 2017. This year the average amount due after the processing of almost 96 percent of statements by Friday amounts to 1,246 euros per taxpayer for the 2017 incomes declared.

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