Anadolu Agency — A Greek government plan to push citizens into online banking to cut down on VAT avoidance is reportedly causing concerns among Greek taxpayers .
Many are waiting in bank lines across the country to apply for e-banking accounts, debit cards and other kinds of cashless money in order to get their entitlement to the tax-free threshold.
The government says the measures are to try and recoup an estimated €6.5 billion in lost revenue caused by people paying for services cash-in-hand — thereby avoiding VAT.
Greek lawmakers have approved the plans but the measures have not yet come into force.
The draft law tabled last month says a person with an annual income up to €10,000 will have to spend 10 percent of their annual revenues through electronic transactions, where VAT is unavoidable.
This means that a citizen with an annual income of €5,000 will have to spend at least €500 via cards or e-banking.
For annual incomes up to €30,000 this minimum spend rises to 15 percent and jumps to 20 percent for incomes over €30,000.
In its latest directive the finance ministry has included utility, transport and supermarket bills in the list of expenditure that qualifies for building up the tax free threshold but excluded rents and the purchase of motor vehicles.
Tax authorities will accept receipts from persons over the age of seventy years of age.
Black economy
According to a 2015 study, one of the main structural problems in Greece is tax evasion and the black economy.
For this reason, the increasing use of electronic payment (cards, electronic banking and electronic money) is an important policy goal for the restoration of the Greek economy.
The same 2015 study stated that electronic payments could increase public revenues by as much as €700 million.
Dimitri Vayanos, professor of finance at the London School of Economics, told Anadolu Agency the law was a useful step but clearly not enough to stop tax evasion alone.
He added that over-taxation was a huge problem for the economy, accusing it of discouraging economic activity overall, pushing some of it underground and distorting activity towards small (and hence on average less-productive) firms since these can evade taxes more easily.
Vayanos said Greece was collecting the same percentage of its GDP in taxes as the European Union average, but because the tax base is smaller (due to evasion), rates have to be higher than the EU average, leading to over-taxation.
“Dealing with tax evasion would require not only laws such as the recent one,” he added, “but also lowering tax rates significantly, especially on corporations and the labour tax [social security contributions] and making up for the shortfall mainly by cutting expenditure.”
No one from Greek Finance Ministry was available for comment on the Anadolu Agency report.
