Despite praising Greece’s strong fiscal performance, the European Commission has once again raised concerns about tax policy, focusing on tax exemptions, energy taxation, and vehicles. While the Commission’s recommendations are not legally binding, they highlight areas where it sees distortions and where future reforms could take place.
1,236 Tax Exemptions Under Scrutiny
The Commission notes that Greece loses substantial revenue through tax expenditures (tax exemptions and special tax treatments). It counted 1,236 tax exemptions, stating that there is no formal mechanism to evaluate their effectiveness.
According to the report:
- These tax exemptions cost the state an estimated €22.88 billion in 2024.
- Major exemptions relate to:
- First-home purchases
- Rental tax relief
- Personal income tax
- Corporate taxation
- Reduced VAT rates
- Excise taxes
The Commission recommends reviewing and streamlining these exemptions to improve efficiency and increase public revenue.
VAT Gap Remains Significant
Although tax compliance has improved, the Commission estimates that Greece’s VAT gap reached €9.4 billion in 2023, representing 18.3% of potential VAT revenues.
It specifically points to exemptions in areas such as:
- Private education
- Financial services
and suggests that these could be reconsidered.
Tax Evasion Among Self-Employed Workers
The report acknowledges progress in combating tax evasion but highlights persistent problems among:
- Self-employed professionals
- Cash-based businesses
- Services provided outside fixed business premises
The Commission notes that personal income tax evasion remains high in sectors where transactions are frequently conducted in cash and are difficult to monitor.
Although not stated explicitly, the report does not suggest abandoning measures such as Greece’s presumptive income system for self-employed workers.
Energy Taxes and Diesel
The Commission is particularly critical of Greece’s energy taxation system.
It argues that:
- Greece remains heavily dependent on fossil fuels.
- Electricity prices are above the EU average, partly due to dependence on natural gas.
- Current tax policy favors fossil fuels over electricity.
The report specifically identifies Greece’s lower taxation of diesel fuel as a distortion.
The Commission notes that the government has effectively subsidized diesel by approximately 15–20 cents per liter during the energy crisis to limit inflation and transportation costs.
Possible Future “Green Tax” Reforms
Looking ahead, the EU’s Green Transition agenda could eventually encourage measures such as:
- Higher excise taxes on diesel
- Bringing diesel taxation closer to gasoline levels
- Vehicle registration taxes based on emissions
- Incentives for electric vehicles
- Tax benefits for cleaner transportation options
- Revisions to circulation taxes based on environmental performance
Aging Vehicle Fleet
The report also highlights that Greece has one of the oldest vehicle fleets in Europe, which contributes to higher emissions and strengthens the case for policies encouraging cleaner and newer vehicles.
Bottom Line
The Commission is not demanding immediate tax increases. However, it is clearly signaling that it believes Greece should:
- Reassess its extensive tax exemptions.
- Continue efforts against tax evasion.
- Gradually shift taxation away from fossil-fuel incentives.
- Encourage cleaner vehicles and energy consumption through tax policy.
These recommendations are likely to influence future discussions on tax reform, environmental policy, and transportation in Greece.
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