- 9 June 2023
- Posted by: Antonis Mouzakis
- Category: Tax News
Tax expert Antonis Mouzakis explains to DEBATER about direct and indirect taxation and their contribution to the budget.
Lately, a great debate has been opened against the backdrop of the elections, regarding direct and indirect taxation and their contribution to the budget.
Taxes are divided into:
Indirect: considered those imposed on the domestic consumption of Goods/Services and on imports.
Direct: are considered those imposed on the income of natural and legal persons and on property (Real estate, donations, inheritances).
This distinction was made on the basis that direct taxes are not passed on, in contrast to indirect taxes that are passed on. Today, however, all taxes are passed on and this must be taken seriously in assessing the impact of taxes.
Which taxes are fairer? The direct or the indirect?
They are clearly the direct ones, since each of us is taxed according to our incomes. Half of the total amount collected by the government from income taxes is paid by only 5% of taxpayers and the other half by 95%. On the contrary, when we buy a loaf of bread or a pack of cigarettes, whether you have a large income or a small income, you will pay exactly the same indirect tax (VAT).
The relationship between direct and indirect taxes is heterogeneous. Indirect taxes are more (57% of the total) and direct taxes are less (43%). In the European Union, Greece has the highest indirect taxes reaching 17.3% of GDP.
By category of tax revenue, the breakdown is as follows:
In personal income taxation, Greece has a share of 15% compared to 23%, which is the average of the O.O.S.A. The reason is the shrinking of incomes due to the continuous crises (economic, health, war) but also the extensive tax evasion.
In the taxation of legal entities, Greece is at 6% compared to 10% which is the m.o. of O.O.S.A. The reduction of the tax rate to 22% has created an incentive to increase the taxable amount.
From insurance contributions, the country derives 31% of the total revenue compared to 26% in the O.O.S.A. member countries.
Property taxes are at 8% compared to 6%, but with the reduction of ENFIA there will be an equalization.
The F.P.A. despite the high rates, it pays tax close to the m.o. (21% vs. 20%).
Excise taxes show the greatest distortion with 19% compared to 13% in O.O.S.A.
The country's greatest dependence is on excise taxes. The special tax on lead-free is twice higher than the minimum tax applied in the EU, on heating oil 14 times higher, while the VAT rate (24%) is among the 3-4 highest in Europe.
The reason for the country's reliance on indirect taxation is that 70% of taxpayers declare income below the tax-free limit and two out of three professionals show losses. As we noted above, personal income taxes give Greece 15% of total tax revenue, when the m.o. for the member countries of the O.O.S.A. is at 23%. This gap is covered by excise duty. When the average yield of special taxes in O.O.S.A. is at 13% of all taxes, Greece expects from fuel, tobacco products, and even from the special tax on mobile telephony to collect 19% of tax revenue.
Indicatively for 2022, indirect taxes brought in revenues to the state budget of 33.2 billion, resulting in the ratio of indirect taxes to total revenues being 60%, which is the first time in the last 20 years.
The forecast for 2023 is that there will be an increase in indirect tax revenues compared to 2022 as there seems to be an increase in consumption, and given that electronic transactions are increasing, combined with the interconnection of cash registers with POS, the VAT collections will be even greater.
In conclusion, we should emphasize that in the extreme inflationary pressure we are experiencing, the peculiarity of the country to depend on indirect taxation is a big obstacle. The immediate reduction of excise taxes would cause a fiscal cost that could not be easily compensated either by curbing fuel consumption or by increasing tax revenues from other sources, such as income tax.
Source: https://www.dnews.gr/eidhseis/oikonomia/443171/mouzakis-sto-dnews-perimenoume-ti-diataksi-gia-ti-forologisi-ton-airbnb https://debater.gr/opinion/amesi-ke-emmesi-fori-ke-i-metaxi-tous-schesi/