Bank of Greece Governor Highlights €40 Billion Discrepancy in Declared Income

During the 19th annual Tax Forum of the American-Hellenic Chamber of Commerce, Bank of Greece Governor Yannis Stournaras unveiled a stark financial revelation. Greeks spend approximately €40 billion more than they officially declare as income. This considerable financial gap offers a troubling glimpse into the extent of Greece's .

Grey Economy Revealed

Yannis Stournaras described this glaring discrepancy as a reflection of the country's sizable grey economy. Official data from 2021 reveals that the grey economy accounted for approximately 20.9% of Greece's GDP. While it serves as a reliable indicator of tax evasion, it's crucial to note that tax evasion and the grey economy are not synonymous.

Over the period spanning 2015 to 2021, this excess spending ranged from €36 billion to €49 billion, as stated by the central banker.

Income Sources and Taxation

In 2021, the total declared income in Greece amounted to around €84 billion. Notably, 79% of this income originated from salaried workers, including merchant marine employees. These groups, whose income is traceable and taxed at the source, bear a disproportionately high tax burden.

On the other hand, approximately 70% of taxpayers engaged in business activities or were self-employed declared annual incomes below €10,000. A staggering 37% of individual taxpayers reported incomes of up to €5,000. This pattern of underreporting is not exclusive to Greece; it's a global phenomenon observed in nearly every country.

The wealthy have devised their own strategies to circumvent taxation, often involving offshore companies and the use of dummy invoices.

Indirect Taxes and Progress

Tax avoidance extends to indirect taxes as well. In 2020, Greece ranked fourth among European Union members for non-payment of Value Added Tax (VAT). The gap between projected VAT receipts and actual collections was estimated at 19.7%, roughly €3 billion. However, Yannis Stournaras emphasized that there has been progress in this area due to the increased adoption of electronic payment methods.

Combating Tax Evasion: Six Proposals

Yannis Stournaras put forth six proposals to address tax evasion effectively:

1. Expand electronic transactions to encompass a broader spectrum of economic activities.
2. Offer incentives for payments made through credit or debit cards and the banking system.
3. Provide tax incentives to individuals who disclose previously undeclared transactions, especially in sectors notorious for high levels of tax evasion.
4. Continually enhance the monitoring systems for electronic transactions at the Public Revenue Authority.
5. Establish a stable and simplified tax regime.
6. Strengthen efforts to foster a culture of income accountability.

These recommendations aim to tackle the issue of tax evasion and foster a more transparent and accountable financial environment in Greece.