Despite significant progress in digitalizing tax administration and improving tax collection rates, Greece continues to face serious structural weaknesses in its tax system, according to the findings of the European Commission’s annual taxation report for 2026. The picture painted by Brussels is that of a country that has substantially reduced tax evasion through technology, yet has failed to resolve the fundamental problem of overtaxing declared economic activity.
Labor remains heavily taxed
The most significant negative finding concerns the tax burden on labor. Despite reductions in social security contributions in recent years, the overall burden on employees and businesses remains higher than the average seen across developed economies.
Greece continues to draw a substantial share of its tax revenues from salaried workers and pensioners — categories of taxpayers with high compliance rates and limited ability to conceal income. This long-standing dependency narrows the scope for relieving the tax burden on declared employment and keeps the cost of hiring persistently high.
For a single worker earning an average wage, the total tax burden in Greece stood at 39.3% of total labor costs in 2025, compared to an OECD average of 35.1%. Greece continues to rank in the upper half of the relevant index among developed nations.
The burden becomes even greater for other household categories. For workers with different family circumstances or higher income levels, the combined weight of taxes and social contributions can approach 44%–45% of total labor costs — a figure that highlights Greece’s chronic dependence on salaried employment as a tax base.
Compared to other Southern European countries, Greece still records a high employment tax burden. Portugal and Spain also carry significant labor taxes, yet in many cases they benefit from a broader tax base and a different balance between direct and indirect taxation. By contrast, countries such as Ireland maintain a lower overall labor tax burden, relying more heavily on other revenue sources and a more competitive environment for attracting investment.
The European Commission notes that the high taxation of labor acts as a deterrent to employment growth, reduces net take-home pay, and negatively affects the economy’s overall competitiveness.
VAT: Less evasion, but distortions remain
Despite a dramatic improvement in tax compliance, Greece continues to be characterized by heavy public revenue dependence on VAT and other indirect taxes. The country maintains one of the highest VAT rates in the European Union at 24%, a level that disproportionately burdens low- and middle-income households and erodes consumer purchasing power.
At the same time, the European Commission points out that Greece continues to record a large “VAT policy gap” — that is, potential revenue losses resulting from exemptions, reduced rates, and special tax regimes. According to European estimates, Greece’s VAT policy gap ranks among the highest in the European Union.
In terms of tax compliance, however, the picture is markedly improved: Greece has achieved one of the largest reductions in the VAT gap across the European Union, with the rate falling to just 9% in 2024, down from approximately 33% in 2013.
The rollout of electronic payments, the mandatory use of point-of-sale terminals, the integration of cash registers with the Independent Authority for Public Revenue (AADE), and the mandatory submission of data to the myDATA platform have all contributed to the significant narrowing of the so-called “VAT gap” — the difference between the tax that should be collected and the amount that actually reaches the public treasury.
Taxation remains excessively dependent on consumption
Greece remains one of the countries that relies heavily on indirect taxes — and VAT in particular — to fund public revenues.
This high dependence on consumption makes the tax system more vulnerable during periods of economic slowdown or declining private spending, while also placing a disproportionate burden on lower-income segments of the population.
Green transition hindered by tax barriers
In the energy sector, the Commission’s core criticism is that the tax treatment in certain cases favors fossil fuels over electricity. The Commission notes that taxes and levies widen the price gap between electricity and natural gas, which can act as a brake on the electrification of the economy and the broader green transition.
Particular attention is also drawn to fuel taxation. Greece remains the only country in the European Union where the excise duty on diesel is significantly lower than that on petrol, despite diesel’s greater environmental impact. The Commission considers this disparity to be undermining incentives for cleaner mobility.
