A “window” for additional permanent tax cuts is opening through the reduction of the “VAT gap” in Greece, as the state secures revenues of up to 3 billion euros annually from limiting tax evasion, which could support new direct tax interventions from 2026 onwards.
Electronic invoicing and myData system drive tax relief measures
According to the head of the State Budget Office in Parliament, Professor Yannis Tsoukalas, VAT is already “running” at double the pace of budget forecasts. For the first time this year, all digital tools are being fully implemented (myData, POS systems, electronic invoicing, digital work cards, digital customer databases), resulting in significantly reduced tax revenue losses.
The VAT “gap” – the deviation between theoretical and actual collections – dropped below 10% in 2024, down from 13.7% in 2023, and could potentially fall to as low as 7% this year. If it reaches the European average of 5% in 2025, then the state’s annual collections will be strengthened by an additional 1 billion euros – adding to the 2 billion euros already secured from this year due to increased compliance.
Government focuses on direct tax cuts for wage earners
The additional revenues, as noted by the Budget Office, can finance a new wave of tax cuts from 2027, while the available fiscal space for 2026 is already estimated at 1.5 billion euros. The government is focusing on direct tax reductions, primarily for wage earners, with Yannis Tsoukalas recommending a redesign of the tax scale, highlighting two basic distortions:
• In the income bracket of 10,001 to 20,000 euros, the rate skyrockets to 22% from 9% for the first 10,000 euros, creating a heavy burden for low and middle incomes.
• The maximum rate of 44% is imposed from 40,000 euros of annual income – a relatively low threshold to be considered “high income”.
Why indirect taxes are not being reduced
He rejects reductions in indirect taxes, arguing that the benefit never reaches consumers but is absorbed in the market chain.
Despite the progress, “the road is still long,” warns the head of the State Budget Office in Parliament. Greece’s shadow economy is still estimated at 16%-18% of GDP, while in 2023 declared incomes reached only 110 billion euros, when ELSTAT recorded consumption of 151 billion euros. The 41 billion euro gap indicates a large volume of undeclared transactions and money “under the table,” as one in four euros spent by households is not declared to tax authorities.
