How Much Tax Do People in Greece Actually Pay?

In Greece, the tax system is composed of various taxes that individuals may encounter based on their income, type, and certain deductions or exemptions. The tax landscape is complex and can significantly vary from one person to another. Here’s an overview of the main taxes:

1. Income Tax

Income tax in Greece is progressive, with rates ranging from 9% to 44% as of 2023. The tax brackets generally follow this structure:

2. Social Security Contributions

Employees contribute approximately 16% of their gross salary to social security, while employers contribute around 24%. Self-employed individuals often have different rates, which can be higher.

3. Value Added Tax (VAT)

The standard VAT rate in Greece is 24%, with reduced rates of 13% and 6% for certain goods and services. This adds an additional layer of tax to consumer goods and services.

4. Property Tax

Property owners pay an annual property tax called ENFIA, based on the value of the property. This tax contributes to the total tax burden for homeowners.

5. Other Taxes

Additional taxes in Greece include inheritance tax, capital gains tax, and various local taxes. These contribute to the overall tax landscape in the country.

Effective Tax Rate

The effective tax rate, or the actual percentage of income paid in taxes, can vary widely depending on deductions and allowances. On average, many individuals face a combined tax and social security contribution rate that can exceed 30% of their income.

Personal Insights and Experiences

I have been living in Greece since 1997, and it is crucial to acknowledge that the tax system is stringent and leaves no room for evasion among the general population. While there have been issues of excessive and unfair taxation in the past, most taxpayers pay their dues.

One common example of income taxation is property rental income. Before 2009, this income was taxed based on the total income, with a poverty limit of €12,500. After 2009, the tax was fixed at 45% for all rental income, regardless of the individual’s overall income. This clause was specifically designed to ensure that rental income was taxed even when it constituted a significant portion of the taxpayer's earnings.

For individuals who attempt to under-report their income, the collective efforts of the Taxation Office and banks to track financial activities have been effective. Professionals like lawyers and doctors with private practices have faced significant fines for tax evasion, although many have also managed to resolve their debts through protracted installment agreements.

As a welfare state, Greece offers basic healthcare services, though these may not be as comprehensive as in other countries. Health care in Greece used to be almost free, but it was also rudimentary. Unemployment benefits were traditionally low, averaging €480 per month before 2009 and €340 since then. These benefits rarely covered more than 3-5 months, which is concerning given the high unemployment rates.

The Role of Tax Evasion and Corporations

The majority of tax evasion in Greece is perpetrated by corporations, including big construction and media companies and Northern European companies. Large-scale tax avoidance by corporations often includes selling promotions to favored politicians in exchange for favorable tax loopholes or outright avoiding paying taxes using political leverage.

Tax evasion by corporations is particularly evident in the case of German company HOTCHEIF. This company was chosen to build and operate the International Athens Airport for 15 years. Despite no apparent advantages in their bid or the quality of their design, HOTCHEIF collected €450 million in VAT from airline passengers and various clients but never remitted this amount to the Greek government. Even with intense intervention from German officials, this amount remains unpaid to this day. This example highlights the extent to which corporations can manipulate the tax system to their advantage.

For the latest information on tax policies or personal tax advice, it is best to consult a tax professional who is familiar with Greek tax law.