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Greece has the highest VAT rate in the Eurozone, ranks 5th in EU

Greece has the highest Value Added Tax rate in the Eurozone, while it ranks 5th in the European Union, a study by the US-based Tax Foundation finds. When it comes to VAT, Greek households are one of the most burdened in Europe.

According to the report, Greece is in the 1st spot in the Eurozone, with a 24% base rate, along with Finland. Compared to all EU members, Greece is in fifth place.

The EU countries with the highest VAT rates are Hungary (27%), and Croatia, Denmark and Sweden (25%).

Luxembourg imposes the lowest rate (17%) followed by Malta (18%), Cyprus, Germany and Romania (19%).

The EU average VAT rate is 21%, six points higher than the minimum rate required by EU regulation.

According to the European Commission, the increase in VAT rates in previous years has deepened the revenue gap. About 6 billion euros are lost in Greece each year due to non-payment of VAT.

Although harmonized to some extent by the European Union (EU), EU member states’ VAT rates vary across countries.

The VAT is a consumption tax assessed on the value added to goods and services, targeting an economically efficient way of raising tax revenues.

The final VAT levied on a good or service is the sum of the VAT paid at each production stage. While VAT-registered businesses can deduct all the tax already paid in the preceding production stages, the end consumer does not receive a credit for the VAT paid, making it a tax on final consumption, notes the Tax Foundation.

However, an OECD study has found that reduced VAT rates and VAT exemptions are not effective in achieving these policy goals and can even be regressive in some instances. Such reduced rates and exemptions can lead to higher administrative and compliance costs and can create economic distortions. To address equity concerns, the OECD instead recommends measures that directly aim at increasing poorer households’ real incomes.

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One comment

  1. VAT is a regressive tax, with the biggest burden falling on those less able to pay. Indebted and low income households pay an higher proportion of their income to this tax than richer households (who only need spend a smaller part of their income to live). In the Eurozone, the poorer members are charged a higher rate, with Greece having the highest rate. Greece is also overpaying tax (ie more than the value of what the government spends) to create surpluses to allow the country to be floated on the market.

    It is worse than it seems, as the rates are also bad for small businesses and the self-employed,

    For example, I could pay and charged for computer services AND pay NO VAT by registering a business in a richer EU member state. (I won’t mention Dutch letterbox companies)

    In the UK (at the moment!) if your earnings do not exceed £85,000 you do need not register and for pay VAT. There is also a flat rate scheme with no paper work that can reduce VAT as low as 11%. https://www.gov.uk/vat-flat-rate-scheme/how-much-you-pay

    This means that small businesses & the self employed in Greece are at a bigger disadvantage than their counterparts and rivals (who also don’t need to live in fear of tax inspectors & be shamed for not paying tax) in other EU states. This makes a nonsense of the EU’s ‘Level playing field’ argument – it doesn’t apply to small businesses and the self-employed.

    These unequal & unfair VAT rates restricts the growth of the poorest members of the EU.