Greece’s early retirement age is a big sticking point for Germany, which is most likely to lead a bailout as the largest euro state. Greek citizens hit the streets in protest at the prospect of the pension age rising from 61 to 63. Meanwhile, Germany recently hiked its retirement age from 65 to 67.
While Greece has big deficits, it also has low taxes as a proportion of GDP, according to Ed Sollbach of Desjardins Securities.
The analyst noted that the country’s tax receipts have declined by 3% of GDP during the past decade and currently stand at 19% of GDP. That puts Greece fourth from the bottom among 27 countries in the European Union.
The contribution of tax recepts to total government receipts is 49%, the second-lowest in the EU. Direct income taxes are at 8% of GDP, 5% lower than the EU average. Only new members like Estonia, Slovakia, Romania and Bulgaria tax less income.
“Tax evasion in Greece is a huge problem,” Mr. Sollback said, pointing to data that show 94% of personal income declared relates to annual incomes of less than €30,000. Only 3,000 people of Greece’s 11 million population declared incomes above €200,000 and just six residents have declared income of more than €1-million. Clearly, “the country is not having much success taxing the rich.”
Recent EU reports also show that in Greece, 30% of VAT receipts remain uncollected, which is the highest percentage in the EU and 2.5x higher than the region’s average.