ECONOMY

Inefficiency bogs tax system

Despite tax rates similar to and even higher than the European Union average ceilings, key weaknesses in the Greek tax system is costing the State dearly, the National Bank of Greece noted in its April-May economic bulletin released yesterday. «The Greek tax system is generally acknowledged to suffer from its complexity and non-transparency, as well as its relatively narrow tax base,» the study pointed out, resulting in total tax revenues lower than the EU average. High administrative costs springing from the system’s inefficiencies were also a negative. Comparisons were based on 1999 data. Greece’s total tax revenues as a percentage of gross domestic product amounted to just 37.2 percent, compared with the EU’s 41.4 percent. The study noted that Greek personal income taxes came up to just 5.5 percent of GDP against the EU average of 11 percent. It attributed the shortfall to the «exceptionally large number of income tax allowances and tax credits.» Furthermore, the «relatively large number of self-employed and small businesses» means that this category of taxpayers was paying personal income taxes rather than corporate taxes. It was also more difficult to detect tax evasion perpetrated by them. Another significant difference is the contribution of social security contributions to tax revenues, which is larger than the comparable EU average, the study pointed out. The government is currently holding a social dialogue on tax reform proposals with the aim of implementing the changes next year. A committee of experts unveiled its recommendations in April, while the State’s proposals are due this month. The committee has suggested cutting income tax allowances, abolishing a number of tax exemptions for corporate taxpayers, and increasing certain indirect taxes. That equates to a bidder paying little more than the $100 million foreseen by the Cabinet as a minimum revenue from the sale.