Ernst & Young: Greek tax evasion estimated at 6 – 9% of GNP

8 November 2016
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In a report presented by Ernst & Young (EY) executive Stefanos Mitsios yesterday during the 8th Tax Forum organized in Thessaloniki by the Hellenic-American Chamber of Commerce, the firm estimates tax evasion in Greece to be as high as 6 to 9 percent of GDP.

According to Naftemboriki, the report conducted by Ernst & Young on behalf of DioNEOsis, high taxation and inadequate IT infrastructure on the part of government are the main culprits.

In EY’s breakdown, tax evasion is estimated at between 1.9 to 4.7% of GDP per annum; uncollected VAT remittance at 3.5%; corporate tax evasion and tax avoidance at 0.06 to 0.15 %; and losses due to bootleg liquor, cigarettes and fuel at 0.45%.

The primary factors contributing to and perpetuating tax evasion in Greece, according to EY, are numerous, including: multiple, overlapping laws; a complex tax system; lack of trust between taxpayers and the Greek tax authority; a continuing rise in taxes and tax rates – among which VAT, personal income tax and taxation on business profits figure prominently; a lack of political volition or ability to tackle the problem systemically; IT infrastructural deficiencies and an inability to exploit new technologies; bureaucracy, multiple jurisdictions, a lack of proper staffing of state services and poor personnel training; a lack of incentive on the part of tax authorities to meet targets; an extremely high number of self-employed professionals in the Greek economy (double the EU average); a large percentage of the workforce employed in small businesses (59%), compared to the EU average of 29 percent; and lastly, what EY called the “tax culture” in the country, or, in other words, tax evasion mentality.

To confront tax evasion effectively, the Ernst & Young report proposes:
• a reduction in tax rates
• the extensive use of plastic money and electronic billing
• effective auditing and settling of tax cases
• the organization and modernization of the tax system
• the elimination of corruption
• the implementation of disincentives
• the creation of a stable and simplified tax system
• an overhaul of the business structure and its growth model
• the fostering of tax conscientiousness and tax education
With such a tall order and so many new taxes, tax evasion will undoubtedly remain the modus operandi in Greece for many more years to come.

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