Greece's VAT Gap: A Success Story
In a remarkable turnaround, Greece has achieved a 61% reduction in its Value-Added Tax (VAT) gap over just six years, according to the Independent Authority for Public Revenue (AADE). This achievement is a testament to the country's commitment to tax compliance and economic reform.
The VAT gap, a measure of the difference between potential and actual tax revenue, had been a significant challenge for Greece. In 2017, the gap stood at a staggering 29%. However, through a combination of policy reforms and increased enforcement, Greece has made extraordinary progress.
By 2023, the VAT gap had shrunk to 11.4%, a 17.6 percentage-point decline from 2017. This reduction is the most significant among EU member states, showcasing Greece's dedication to fiscal responsibility. Furthermore, Greece's efforts have not gone unnoticed, as it was one of only nine countries to further reduce its VAT gap between 2022 and 2023, achieving the sixth-largest annual decrease.
The AADE's Governor, Giorgos Pitsilis, emphasized the importance of these reforms, stating that they contribute to stronger public revenues, support economic growth, and promote fair competition in the market. The authority's continued efforts are expected to further reduce the VAT gap, with preliminary estimates for 2024 pointing to a potential reduction to 9%.
This success story highlights the potential for significant improvements in tax compliance through strategic reforms and enforcement. It also serves as a model for other countries facing similar challenges, demonstrating that with dedication and the right approach, substantial progress can be made in addressing the VAT gap.
