Greece has the highest level of indirect taxation in the eurozone and it is likely that it will remain in the same position in 2019. This finding steps from next year’s draft budgets recently submitted by the 19 eurozone member states to the European Commission.
According to Greece’s 2019 draft budget, indirect taxes—including the value-added tax (VAT) and excise duties—amount to 17.3 percent of Greece’s gross domestic product, placing the country in the top position in the eurozone, ahead of France and Cyprus.
Greece also shows the largest spread between returns of direct and indirect taxation, with direct tax revenues expected to reach 10 percent of GDP next year, 7.3 percentage points below revenues from indirect taxes. For 2018, the spread is projected to amount to 6.8 percentage points below indirect tax revenues.
Excessive rates of direct taxation, which are as high as 55 percent of declared income excluding insurance contributions, result in tax evasion. In turn, this results in a wide discrepancy between returns on direct taxation and indirect taxes.
The sum of tax and social security contributions is 41.5 percent of GDP in Greece in 2018, higher than the eurozone average of 36.87 percent and placing Greece in the top five of Eurozone member states. Despite this, Greek citizens do not enjoy the same level of benefits as their European peers. For instance, the sum of taxes and social security contributions in Finland is 42.3 percent, but Finland allocates 2.1 percent of its GDP for the protection of the unemployed, while the corresponding figure for Greece is only 0.6 percent.
Only Belgium (47.4 percent), France (44.8 percent), Finland (42.3 percent) and Italy (41.9 percent) are ahead of Greece in the ranking of combined tax and social security contributions as a percentage of GDP.