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EU wants hikes in V.A.T & other taxes in Greece, Portugal, Spain, Italy…

The gap between theory and practice… That’s the main problem of institutional technocrats seeking solutions to countries where real people live in. They just don’t get it. that their theoretical approach is good on academic level but a failure in real life. A fact that is being confirmed again and again, especially since Greece was caught in the claws of international lenders – whether our EU-partners or the IMF’s exterminators.

While one in three Greeks live at the poverty line (Eurostat) and many households struggle to cover basic needs, here comes the European Commission and asks new hikes in indirect taxes: mainly in Value Added Tax and Special Consumption Tax.

In which sector should these hikes occur? In electricity, in natural gas and fuel (oil)! A measure that would automatically trigger price hikes in all consumption goods and services, food included.

However Greece is not alone: other debt-ridden countries of the European south like Portugal, Spain and Italy are on the target of the EU technocrats who earn bunches of euro every month with allowances and benefits that we, the EU taxpayers, pay them.

According to European Commission report “Tax Reforms in EU member States”

EU Member States collect VAT revenues far below the level that could be collected theoretically if all consumption items were taxed at the standard rate.

Widespread use of VAT exemptions and reduced VAT rates and a high gap in tax collection are among the main drivers of this gap. Greece, Spain, Italy, Latvia, Portugal and the UK have a particularly low level of revenues from VAT compared with theoretical levels as measured by the VAT revenue ratio. Several Member States face the challenge of shifting from transaction to recurrent taxes on immovable property. The coexistence of relatively high transaction taxes on property transfers and relatively low recurrent tax on property suggests scope for this kind of efficiency enhancing reform. This seems to be the case particularly in Belgium, Italy and Greece, but reforms could also be considered in Spain, Luxembourg, France and Portugal…”

Specifically on the taxation issue in Greece, the European Commission recognizes the progress that it has been made but it stresses that more has to be done in the near future so that the tax collecting mechanism will bring more. The report attaches particular importance to the pilot-program of VAT reduction ( in catering businesses) and stresses that taxes on heating oil. [ for the simple reason that Greeks refused/had no money to pay 1.50 EUR per liter! 🙂 ]

At the same time the EC’s technocrats acknowledge that Greece recorded the largest increase in income taxes within a single year.

Greece: Income tax increased by 3.9% in 2012, while the European average increase was only 0.3%

And when we’re dead and gone, I wonder who will pay the taxes that feed the EU technocrats. The question is theoretical…

Full EC Taxation Reform Report here, Greek summary here

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4 comments

  1. When you will be dead and gone the remaining people will have more resource per capita. The more the dead the better for the living. That’s the logic in a resource constrained world.

    Good reasons to increase energy taxes are climate change and energy security.Climate will be less forgivable than poverty.

    • keeptalkinggreece

      when I’m dead & gone, not only I will not pay income taxes but also no social contributions so the pensioners will get their pensions. Unfortunately, the logic of the illogical technocrats of this world cannot eliminate all pensioners, all 65+ at once.

      Taxes imposed on heating oil (2012) and natural gas (2011) sent people burning wood and other (cheap?) material with the effect we spent 3 months without being able to open the window evenings/nights due to awful and stinky air pollution.

  2. Technocrats, they maybe, but their theoretical approach is IS NOT even good at an academic level.

    As for VAT tax as revenue raising mechanisms, in any country there is always a point when it can breakdown. The poorer the country, the more likely it will.

    VAT revenues depends on both the willingness AND ability whatever it is that the tax is imposed on. Raising VAT doesn’t guarantee more tax revenues. For example. when the final price of something goes up by 10% AND the demand for it falls by more than 10%, then revenues will fall.

    In normal times, with basics things like oil for heating this usually doesn’t happen. However, in Greece, where the ability to pay for anything is rapidly shrinking, it does….People just go without heating.

    Hence, it is also one of the difficulties that poorer members have in meeting their budget targets. The ability to pay is lower and less tax revenues are collected. Increasing VAT doesn’t necessarily improve tax revenues.

    • keeptalkinggreece

      thanks Chesire Cat. maybe they are cheap laborers with primary education degree (these technocrats)