## Improving tax collection in Greece — Petrakis

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**Canonical URL:** [Improving tax collection in Greece — Petrakis](https://www.imf.org/-/media/files/publications/fandd/article/2019/september/improving-tax-collection-in-greece-petrakis.pdf)

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### Context and objectives
- Greece aims to improve tax compliance to lower tax rates and finance social safety nets and public investment following an eight-year economic crisis that cut GDP by 25 percent and led to €289 billion in international bailouts.
- The Independent Agency for Public Revenue was created to insulate revenue administration from political pressure; it began operations on January 1, 2017, with George Pitsilis appointed head.

### Key challenges identified
- Tax evasion and undeclared economic activity:
  - The shadow, or undeclared, economy was estimated to account for as much as 27 percent of GDP.
  - Some 75 percent of self-employed professionals declared income below the taxable threshold (IMF study).
- Structural and institutional problems:
  - Antiquated tax collection system vulnerable to political interference.
  - Corruption, frequent changes in the tax code, slow-moving court system delaying dispute resolution.
  - Attempts to doctor fiscal statistics prior to the crisis.
- Concentration of tax burden and behavioral issues:
  - Self-employed make up almost 30 percent of the Greek workforce (Eurostat), the highest proportion in the European Union and double the EU average.
  - Tax burden carried mainly by salaried employees and pensioners; self-employed groups evaded the tax net.
  - Cultural preference for cash among older and rural populations; routine cash discounts from self-employed professionals to avoid taxes.

### Operational measures and innovations
- Public campaign and enforcement:
  - “Apodixi, please” campaign encouraging tourists to use plastic and ask for a receipt (apodixi).
  - Audits and inspections, including shutdowns of businesses (e.g., restaurants on Mykonos) that don’t issue receipts.
  - Surveillance drones used (example: Santorini) to monitor compliance among tour boat operators.
  - Inspectors conducting 50,500 on-the-spot audits and inspections in the summer season.
- Incentives and consumer-facing measures:
  - Monthly lottery offering taxpayers rewards of €1,000 for using payment cards.
- Institutional reforms and targeting:
  - Better access to third-party information such as bank accounts.
  - Dispute resolution system improved to deal with complaints more quickly.
  - Customs mobile squads brought under a new central organization.
  - Special investigation unit focusing on three major sectors: big business, smaller firms and the self-employed, and high-net-worth individuals.
- Technology and payments infrastructure:
  - Proliferation of point-of-sale terminals: number of terminals more than doubled, to some 700,000, in the two years ending in December 2018 (Cardlink).
  - Value of transactions jumped to €31.5 billion from €19 billion.
  - Electronic payments contributed at least half of the increase in value-added tax revenue recorded in 2017 (IOBE study).
  - In 2018, electronic payments jumped by 24 percent to €31 billion (European Commission report).
  - VAT accounts for one-third of government revenue.
  - Quarter of the terminals installed in 2017 and 2018 remain inactive (Cardlink).

### Outcomes and quantitative impacts
- Tourism and spending:
  - If tourist arrivals match last year’s numbers, some 30 million people will visit Greece this year, buying Greek coffees and Greek salads, renting cars and beach umbrellas, and boosting the country’s shrunken economy with €16 billion in spending.
- Fiscal performance:
  - Budget surplus of 1.1 percent of GDP in 2018, compared with a deficit of 11.2 percent in 2010.
- Payment and VAT metrics:
  - Card usage as a percentage of private consumption was 14.8 percentage points below the EU average in 2017 (IOBE).
  - Annual VAT revenues would be 21 percent, or €3.3 billion higher, if Greece were to reach the average EU card-usage level (IOBE estimate).

### Policy orientation and leadership messages
- Political stance and tax policy:
  - Prime Minister Kyriakos Mitsotakis announced cuts to property taxes and corporate tax rates and emphasized electronic payments and obligatory electronic invoicing and bookkeeping to broaden the tax base.
  - Mitsotakis: “Taxation cannot just be a source of income—it must evolve into a lever of growth.”
- Leadership and culture change:
  - George Pitsilis emphasizes changing attitudes: fostering personal responsibility to avoid accepting cash discounts that undermine public finances and future pensions and job prospects.
  - Pitsilis maintains operational continuity during political events (e.g., snap elections), instructing staff there would be no relaxation of tax administration.

### Risks and remaining gaps
- Reversal risk:
  - Easing of capital controls and limits on cash withdrawals could weaken tax compliance.
- Inactive infrastructure:
  - A significant share of newly installed point-of-sale terminals remain inactive.
- Behavioral and structural barriers:
  - Cash preference among older and rural populations and entrenched practices among the self-employed continue to limit gains from electronic payments.

*Source: Improving tax collection in Greece — Maria Petrakis, Finance & Development, September 2019.*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2019/september/improving-tax-collection-in-greece-petrakis.pdf_