Šemeta: Tax evasion costing Greece 5% of its GDP

Greece could generate budget revenues amounting to 5% of national output annually if it reforms tax collection and clamps down on tax cheats, the European Union's tax chief, Algirdas Šemeta, told a Greek newspaper.

Athens plans reforms next year to combat rampant tax evasion as it struggles to shore up public finances and achieve a primary budget surplus, both necessary to continue receiving bailout aid from international lenders.

The eurozone agreed on Thursday (13 December) to provide nearly €50 billion in long-delayed aid to Greece, averting a catastrophic default and securing its survival in the zone after months of doubt and political turmoil.

Experts estimate that a shadow economy lying outside Greece's tax system amounted to more than a quarter of annual output in 2011, the highest level in the European Union.

It is common in the country for small business owners to under-report sales and pay lower value-added tax. The self-employed such as plumbers and electricians often get paid in cash, avoiding receipts.

"According to our estimates at the Commission, out of the €53 billion in (overdue) taxes owed to the Greek state, 15 to 20% could be collected," Šemeta told newspaper Kathimerini in an interview.

He said the country's tax system needed an overhaul with simple and easily applicable rules.

A bill introduced to boost state revenues is due to scrap many tax exemptions and raise tax rates on property, companies and households with above-average income. The government also plans a tax on capital gains on stocks traded on the Athens stock exchange.

The measures are expected to increase tax revenues by about €2.5 billion in 2013-2014.

Speaking to a medical conference on Saturday, Greek Finance Minister Yannis Stournaras said the government would complete tax reforms in coming months so that all Greeks contribute to saving the country.

He cited 2011 tax data revealing that half of the self-employed reported annual incomes of up to €5,000, showing the biggest tax burden fell on wage earners and pensioners.

Šemeta told Kathimerini that the 27-nation European Union loses about €1 trillion annually because of tax evasion and that capturing part of the foregone tax revenue could help European economies recover faster.

"Every citizen in Europe loses about €2,000 every year because of tax evasion," the commissioner said.

At their March 2012 summit, EU heads of states asked the European Commission "to rapidly develop concrete ways to improve the fight against tax fraud and tax evasion, including in relation to third countries and to report by June 2012".

The Commission followed up on 27 June with a review of the measures currently in place, to see how they can be improved and intensified.

The aim is to create a stronger, more coordinated approach to tackling tax evasion, aggressive financial and tax jurisdictions, and unfair tax competition.

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