Authors: Nicholas Karavitis, Kosmas Paipetis, Maria Priniotaki

Title: Overdue Tax Debts in Greece

Abstract

Accumulation of overdue tax debts has been a thorn in the side of Greek fiscal policy in the past two decades. The dramatic accumulation of tax debts during the crisis of 2008 called for urgent reforms and measures to deal with the situation. Under the pressure of three Economic Adjustment Programmes, the MOU governments embarked on an effort to reform Greek Tax Administration, with emphasis on independence, depoliticization and wider digital transformation. This has been a slow process yet to be completed and the strains to the system introduced by the ongoing health crisis, make the need of reform even more urgent.

The present paper puts overdue tax debts into perspective, analyzes the process of accumulation and brings out its main features, assesses the efficiency of Tax Administration and comes up with several policy recommendations. For the analysis we make use of data never employed before to the best of our knowledge so that various aspects of the accumulation process are revealed. After we profile overdue debts stock and its characteristics, we compile an input-output table which leads us to the composition of a series of indicators which help us put overdue debts in the context of the fiscal policies of the last two decades and assess the efficiency of tax administration.

The results of the research indicate poor quality of debts accumulated over time, as well as low efficiency of the Tax Administration regarding the collection of taxes and ensuring the necessary level of tax compliance. In particular, the analysis shows that the reforms introduced under the pressure of the Economic Adjustment Programmes have not been much effective and radical steps have to be taken to two directions: overhauling of the existing stock of debt and a fresh approach to dealing with new debts, both from the preventive and the corrective side. Among other options, we highlight the need for writing off bad debts, we advocate the advantages of a more holistic approach to the management of debts held by General Government and we favour a turn away from the bureaucratic approach to overdue debts to practices that take into account the tax payer’s needs in an efficient manner.

JEL classification: H29, H71, H80

Keywords: Tax Administration, overdue debt, tax collection, uncollectable debt, compliance gap.

AKNOWLEDGEMENTS

This research is co-financed by Greece and the European Union (European Social Fund- ESF) through the Operational Programme «Human Resources Development, Education and Lifelong Learning 2014-2020» in the context of the project “Best practices in tax arrears management in post-MOU Greece: economic and institutional risks and opportunities” (MIS 5049109).

The authors would like to thank the Independent Authority for Public Revenues (IAPR) for sharing the necessary data for the production of this paper.