ECONOMY

The distribution of taxes

Greece suffers from a great imbalance in the tax burden, but the situation is showing signs of improvement, thanks to the recent tax breaks for low and middle-level incomes, the Finance Ministry said. Ministry data show that 0.6 percent of taxpayers account for 20 percent of income taxes paid today. Before the recent changes, about 95 percent of taxpayers covered only 48 percent of income tax revenues, which means that the rest (52 percent) was paid by just 5 percent of contributors. If the country had another 5 percent paying such high income taxes then the remaining 90 percent would not need to pay any tax at all. The data show, however, that the low-income strata are excessively burdened with indirect taxes, the most regressive type, which are much higher in Greece compared with the rest of Europe, and have important negative consequences on the cost of living, income and competitiveness. In the 2004 financial year, 3,042,927 taxpayers, or 58.4 percent, earning up to 11,000 euros a year, paid 0.6 percent of all taxes. Another 1,227,061 middle-income taxpayers, paid 11.7 percent of the total. The bulk of income taxes (51.8 percent) was paid by just 4 percent of taxpayers, who earn more than 41,000 euros annually. A large proportion of taxpayers, reporting low incomes, is found to evade taxes, especially freelancers and the self-employed, who have found it easier to do so after after the abolition of «objective» criteria – or items presumed as evidence of income – for taxation.