## Greece’s Chief Tax Collector is on a Mission to Improve Compliance

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**Canonical URL:** [Greece’s Chief Tax Collector is on a Mission to Improve Compliance](https://www.imf.org/en/publications/fandd/issues/2019/09/improving-tax-collection-in-greece-petrakis)

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## Bibliographic details
- Authors: MARIA PETRAKIS
- Published: September 1, 2019

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### Overview
- Article by MARIA PETRAKIS, F&D Magazine, Taxing Times, September 2019.
- Profile of George Pitsilis, head of Greece’s Independent Agency for Public Revenue, and the agency’s efforts to improve tax compliance and enforcement.

### Challenges in Greece’s tax collection
- Tourism-driven cash transactions undermine VAT collection:
  - If tourist arrivals match last year’s numbers, some 30 million people will visit Greece this year, generating €16 billion in spending.
- High VAT and incentives to evade:
  - Value-added tax rate of 24 percent.
- Historic fiscal deterioration and shadow economy:
  - Budget deficit rose to more than 15 percent of GDP in 2009.
  - GDP fell by 25 percent during an eight-year economic crisis.
  - €289 billion in international bailouts.
  - Shadow/undeclared economy 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 weaknesses:
  - Antiquated tax collection system, political interference, frequent tax-code changes, slow court dispute resolution.
  - Capital controls imposed in 2015, including daily limits on ATM cash withdrawals.

### Reforms and enforcement measures implemented
- Institutional change:
  - Creation of the Independent Agency for Public Revenue; agency opened January 1, 2017.
  - Agency intended to be insulated from political pressure and complex labor rules.
- Public awareness and behavioral nudges:
  - Public relations campaign “Apodixi, please” encouraging tourists to use cards and ask for receipts (apodixi).
  - Monthly lottery offering taxpayers rewards of €1,000 for using payment cards.
- Inspections and audits:
  - 50,500 on-the-spot audits and inspections planned for the summer season.
  - Audits and shutdowns of noncompliant businesses, including high-profile restaurants.
- Technology and surveillance:
  - Surveillance drones used over Santorini to monitor issuance of receipts by tour operators.
  - Expanded access to third-party information such as bank accounts.
  - Customs mobile squads centralized; new special unit focused on big business, smaller firms and the self-employed, and high-net-worth individuals.
- Mandatory hardware and digitalization:
  - Proliferation and mandatory requirement of point-of-sale terminals across professions and businesses.
  - Obligatory electronic invoicing and bookkeeping mentioned as broadening the tax base.

### Results and key statistics
- Point-of-sale terminals and electronic transactions:
  - 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 VAT revenue recorded in 2017 (IOBE study).
  - In 2018, electronic payments jumped by 24 percent to €31 billion (European Commission report).
- Fiscal outcomes:
  - VAT accounts for one-third of government revenue.
  - Spending cuts and higher revenue helped generate a budget surplus of 1.1 percent of GDP last year, compared with a deficit of 11.2 percent in 2010.
- Additional potential gains from card use:
  - 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 reached the average EU level (IOBE).
- Remaining gaps and risks:
  - With easing of capital controls, tax compliance could suffer.
  - A quarter of the terminals installed in 2017 and 2018 remain inactive (Cardlink).
  - Self-employed comprise almost 30 percent of the Greek workforce (Eurostat) — the highest proportion in the EU and double the EU average — and are a major source of under-declaration.

### Behavioral and political context
- Cultural and demographic obstacles:
  - Older Greeks and rural populations prefer cash; self-employed often offer cash discounts to avoid reporting.
- Political signals and reforms:
  - Promises to ease tax burden contributed to the election victory in July of Prime Minister Kyriakos Mitsotakis.
  - Mitsotakis announced cuts to property taxes and corporate tax rates and endorsed electronic payments and mandatory electronic invoicing and bookkeeping to broaden the tax base.
- Leadership and organizational culture:
  - Pitsilis emphasized no relaxation of tax administration during election periods, contrasting with past practices of easing enforcement for political favor.
  - Pitsilis: “Tax evasion is not one monolithic thing… there is no one-size-fits-all approach.”
  - Pitsilis emphasized personal responsibility: accepting cash discounts to evade tax “harms our future, the future of our children, our pensions, and affects whether our child, or our grandchild, finds a job tomorrow.”

### Policy implications and recommendations (implied by actions described)
- Combine technological adoption with enforcement and public education:
  - Expand point-of-sale terminal deployment and activation.
  - Maintain and publicize inspections, audits, and high-profile enforcement to raise awareness.
  - Use incentives (lotteries, rewards) to nudge card usage among consumers.
- Strengthen institutional independence and data access:
  - Preserve the independence of the revenue agency and continue to broaden access to third-party data (bank accounts, electronic records).
- Targeted strategies for heterogeneous evasion channels:
  - Deploy sector-specific investigative units for big business, smaller firms and the self-employed, and high-net-worth individuals.
- Sustain reforms during political cycles:
  - Insulate tax administration from political pressures to prevent relaxation of enforcement during election periods.

*From: "Greece’s Chief Tax Collector is on a Mission to Improve Compliance" — MARIA PETRAKIS, F&D Magazine, September 2019.*

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_Source: https://www.imf.org/en/publications/fandd/issues/2019/09/improving-tax-collection-in-greece-petrakis_