By Chrysostomos Tsoufis

When in October 2023, Yiannis Stournaras was talking about 40 billion euros of underground economy (based on how much the Greek citizens had declared and how much they had consumed) of course he knew what he was talking about.

According to analyzes listed in the latest Economic Developments Bulletin of the Center for Planning and Economic Research, the shadow economy in Greece in 2022 – i.e. the totality of economic activities hidden from official authorities for monetary, regulatory and institutional reasons – was at 20.9% of GDP or around 46 billion euros. Even reduced by more than 7 points compared to 2003, the Greek underground economy was higher as a percentage of GDP by 3.3 points than the average of the European Union.

The main factors according to KEPE that contribute to the country having such high percentages of the “grey” economy as it is otherwise called are:
• The high rate of self-employment
• The very high amount of indirect taxes
• Unemployment
• Tax ethics
• The personal income tax
• The regulatory framework

Computer models say that in Greece out of the 46 billion euros of the underground economy, 37.6% (17.3 billion euros) is due to the level of self-employment.

“Share” 18% (8.3 billion euros) has unemployment and 10% (4.6 billion euros) tax ethics. High indirect tax rates and frequent cash payments to businesses could lead to large-scale tax evasion. In addition, the low quality of institutions, inefficient state institutions, complex tax and regulatory systems, the absence of a flexible legal framework and corruption are the main determinants of the underground economy.

Of course, from 2022 until today, enough water has flowed down the drain and some of the…bad numbers have improved.

SELF-EMPLOYMENT

In 2022 self-employment in Greece was recorded by Eurostat at 27.1%. In 2023, it fell to 26.3%, remaining the highest in the EU. At the same time, however, the way of taxing the self-employed has changed with the introduction of the presumptive method of taxation, reducing the focus of tax evasion that is part of the underground economy.

INDIRECT TAXES

Here the situation is rather worse, with the share of indirect taxes in the government’s revenue mix constantly increasing as it is a government choice to reduce direct taxes. Here at we wrote about the state budget’s addiction to indirect taxes. Compared to 2023, VAT revenues are expected to increase by 26% in 2026.

UNEMPLOYMENT

2023 ended with unemployment at 12%, in August unemployment was measured at 8.1%.

CASH – ELECTRONIC TRANSACTIONS

The growth of electronic transactions is rapid in the country. In the period 2019-2024 card payments have increased by 158%, the IRIS payment system alone has seen a jump of 2,500%. Even so, of course, there is still a bright field of glory, as according to the ECB in 2024, 54% of transactions in Greece were still done in cash.

MEASURES AGAINST TAX AVOIDANCE

POS – cash register connection, extension of the myDATA system application for businesses, electronic invoicing, digital customer register, digital consignment note, mandatory from 2026 rent payment via bank are just some of the measures implemented/have been implemented and will have led to an increase in tax evasion income by 6.2 billion euros in 2026.

Similarly, the VAT gap – the loss of VAT revenue – has shrunk from 13.7% in 2022 to single digits now (the latest figures are awaited).

Of course, the efforts must continue and be intensified. The universality of the digital clientele, new control systems to automatically monitor the evolution of overdue debts of each debtor and more effective use of artificial intelligence with the aim of further reducing bureaucracy are some of the proposals of KEPE.