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The loss of revenue from VAT in Greece in 2008-2012 amounted to 39.8 billion euro and, as noted by the European Commission, the loss of revenue from property tax in the country amounted to 9.7 billion euro or 4.7% of  the gross domestic product (GDP) in 2011.

This is the poorest result in the euro area and the second poorest after Romania in the European Union. The total losses of the European Union in the same year amounted to 193 billion euro or 1.5% of GDP.

According to a study by the European Commission, the loss of revenue from VAT in Greece in 2008 was equal to 3% of GDP (7.0 billion euro), it was 3.5% of GDP (8.1 billion euro) in 2009, 3.3% (7.3 billion euro) in 2010 and 4.7% of GDP in 2011.

According to the Commission, Greece’s revenue from VAT should have amounted to 24.8 billion euro in 2011 whereas it collected only 15 billion euro. It is estimated that the loss in 2012 amounted to 7.7 billion euro.

The data contained in the study by the European Commission show the significant problems in the collection of VAT in some member states and mainly in Greece.

As is clear from the study which is based on data up to 2011, the situation in the country had rapidly deteriorated with the start of the crisis in 2008. Despite the increase in VAT rates, the revenue had collapsed because of the strong contraction of the economy.

Rapid deterioration

Indicative of the rapid deterioration of the situation is the fact that the average loss of VAT revenue in the period 2000-2011 was equal to 3% of GDP and it reached 4.7% of GDP in 2011, thus marking a specific record.

The data of the survey also show that the situation in Greece can be compared only with Romania and other Eastern European countries with a weak tax system, such as Slovakia, accounting for the fact that the loss of revenue in the southern countries is slightly higher than in the countries in the north. For example, the loss of revenue from VAT in Italy constitutes 2.3% of GDP, 1.4% in Spain and 1.6% of GDP in Portugal.

Losses

The Commission notes in its study that the loss of revenue is not solely the result of tax evasion and avoidance of payment of taxes but also of other factors related to the crisis, like bankruptcy, failure to pay or delay in the payment of the tax by the business.

Commissioner for Tax Policy Algridas Semeta defines the amount that is annually lost from uncollected VAT as "unacceptably high", bearing in mind the member states’ need for tax revenue in order for them to be able to consolidate their public finances.

However, the Commissioner believes that the situation will improve due to the measures against tax evasion which are being taken at European level and the political will of the governments to reduce this phenomenon.

Measures to improve the tax collection mechanisms

It has been shown that the willingness to pay VAT falls in the event of tax increases, at least in countries that do not have particularly effective tax collection mechanisms.

Similar trends are observed when an economy is in recession and the above data fully confirm this theory.

Pieces of research show the importance of the role played by thetax collection mechanism and how the VAT regime should be reformed in order for it to meet the requirements of the current crisis in the euro zone.

It is clear that the reform of VAT rules and of the methods of its collection is one of the main factors when applying fiscal adjustment programmes.

As for tax evasion and avoidance of paying taxes, the European leaders pledged in May to take measures at European level and within specific deadlines in order to overcome these negative developments which each year cost the member states revenue losses amounting to 1 billion euro.

Increase in taxes in 2014

The amounts of the taxes due in 2014 will be higher since, after the changes in the existing legislation, about 5,725,000 taxpayers will have to pay an average of 400 euro more compared with this year.

Traders, artisans and freelancers with low income of up to 10,000 euro will be among the biggest “losers” due to the new tax provisions, as the tax rates for them will vary from 26 % to 40.3%. In addition, millions of employees and pensioners with an annual income exceeding 9,550 euro and with one or more children will pay significantly higher taxes in 2014 too.

Let us recall that under the already existing changes affecting the income tax, the non-taxable minimum of 5,000 euro will be cancelled as of 2014 and an abatement of up to 2,100 euro will be allowed.

The income of traders and freelancers will be taxed at rates starting from 26%, the income of those involved in agriculture will be taxed at a rate of 13 % and the tax rates for landlords will start from 10%. Furthermore, as of 2014, the low rate of 10 % for rents will be increased to 11% for annual incomes of up to 12,000 euro.

In all cases, the taxes taxpayers will have to pay next year will increase by 2.5 billion euro, as stated in the draft state budget which is currently being prepared and which will be presented to the representatives of the supervisory Troika next week.

In particular, the experts in the Ministry of Finance have estimated that next year the direct taxes on the people’s income and property will bring to the treasury 19.5 billion euro compared with 17.5 billion euro which it is expected that will be collected this year.