By Sissis Stavropirakos
The European Commission and the OECD are lobbying for cutting and eliminating tax exemptions, targeting the current 1,236 regulations that cost the budget around EUR 22.9 billion. These are specific arrangements that directly or indirectly reduce tax revenue and provide for exemptions, reductions, discounts, reduced rates and tax deferrals.
The Commission and the OECD do not argue that any tax exemption is necessarily wrong but they identify the problem in particular that there is no systematic assessment, that there is unequal treatment between taxpayers, and that there is no significant budget resources.
In particular, the OECD states that "the reduction of tax costs and the continuation of measures to combat tax evasion would create an additional financial area", while the Commission calls for the 1,236 cases of tax exemptions to be assessed and streamlined with a significant financial burden.
In the past, the OECD has stressed that the many tax costs, in particular reduced rates and VAT exemptions, reduce public revenue, while the data on their effectiveness are weak.
The main issue is not a horizontal abolition, but their assessment: what exemptions really help, which disproportionately specific groups and which can be reduced to widen the tax base without increasing rates. It is noted that the same recommendation has recently been expressed by both the International Monetary Fund and the Governor of the Bank of Greece, Giannis Stournaras, while the IOBE in its analysis reported the need to review the extent and cost of tax exemptions, warning that their continued expansion limits tax revenues and increases the complexity of the tax system.
The course of tax exemptions in recent years has been constantly increasing. In 2014 amid memorandums amounted to EUR 3,042 billion to form EUR 7,716 billion in 2017. With the exception of the pandemic period, from 2021 onwards, growth has continued to reach EUR 22,881 billion.
The X-ray of tax exemptions
Most cases of tax exemptions are found in income taxation. For example, 252 cases, such as reductions in the costs of small and medium-sized enterprises, income exemptions from capital, capital gains, business activity, rental services, tax reductions, special withholding, exemptions from evidence and emergency arrangements, are recorded in the income tax. In the income tax of legal persons and legal entities there are 265 cases, such as subjective exemptions, business income exemptions, special cost reductions, development laws, reduced rates, business transformations and exceptional crisis arrangements.
An important part of tax exemptions also concerns property and transactions. 29 cases are recorded in the ENFIA, 38 in inheritance tax, 66 in donations, parental benefits and profits from gambling, 49 in property transfer tax and 19 in fundraising tax.
There are still 75 cases in VAT relating to exemptions within the country, intra-Community acquisitions and imports of goods, 76 in stamp duty, 40 in excise duty, 33 in traffic charges, 26 in vehicle registration charge and in coffee tax, as well as 203 general exemptions, many of which are repeated in individual categories.
Exemptions to the Special Consumption Taxes cost EUR 1.02 billion and an additional EUR 1.01 billion cost VAT exemptions due to reduced rates in the islands. In its report yesterday and the issue of EICs in diesel fuel, the Commission stressed that the tax was particularly low compared with the taxation of petrol.
