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EY estimates yearly tax evasion in Greece at between 6 to 9% of GDP

Ernst & Young estimates tax evasion in Greece at between 6 to 9 percent of GDP on an annual basis, a figure it cites and analyzes in a recent report.

According to the international professional services firm, the primary reasons for the exorbitant figure, by European and North American standards, are very high tax rates and deficient IT infrastructure used by authorities.

EY Greece executive Stefanos Mitsios presented the report during the 8th Tax Forum event organized in Thessaloniki by the Hellenic-American Chamber of Commerce.

The breakdown, according to EY, is estimated tax evasion of between 1.9 to 4.7 percent of GDP by individuals on an annual basis; uncollected VAT remittances – calculated over the entire figure ascribed to tax evasion – reaches an estimated 3.5 percent of GDP; tax evasion and tax avoidance by businesses, 0.06 to 0.15 percent of GDP, and losses from bootleg liquor, cigarettes and fuel reaching 0.45 percent of GDP.

The primary factors contributing and sustaining tax evasion in Greece, according to EY, include: multiple and overlapping laws; a complex tax system; lack of trust between taxpayers and tax bureau employees; a continuing rise in tax rates, including VAT, personal income taxes and taxes on business profits; a lack of political volition to tackle the systemic problem; IT deficiencies and an inability to exploit new technologies; red-tape, multiple jurisdictions and a lack of proper staffing of state services, along with slipshot training of personnel; lack of incentives for tax authorities to meet targets; the extremely high number of self-employed professionals in the Greek economy (double the EU average), as well as the percentage of employed people in micro businesses (59 percent, with 0 to nine employees on the payroll, compared to an EU average of 29 percent); and finally, what EY called the “tax culture” in the country, or, in other words, a mentality to avoid paying taxes.