Greeks set to face heavy fines if they don't spend 30 per cent of their income electronicallySkip to sections navigationSkip to contentSkip to footer
Updated December 9, 2019 — 11.17am first published at 11.00am
Greeks will be hit with a hefty fine if they do not spend almost a third of their income electronically in an unprecedented bid by the new government to stamp out rampant tax evasion.
The government expects to raise more than €500 million ($808 million) every year from the initiative that will force Greeks to spend 30 per cent of their income electronically, Alex Patelis, the prime minister's chief economic adviser, revealed.
The scheme is part of new prime minister Kyriakos Mitsotakis's sweeping overhaul to revive growth. Credit: Bloomberg
Individuals that fail to meet the target will be hit with a 22 per cent fine on the shortfall. Therefore, if an individual spends just 20 per cent of their income through electronic means, they would face a 22 per cent tax on the remaining 10 per cent bar some exclusions.
The scheme is a radical attempt to cast some light on Greece's huge shadow economy, the world's largest, and is part of new prime minister Kyriakos Mitsotakis's sweeping overhaul to revive growth.
"This is a big initiative next year that will either raise more revenue because [people] will pay the penalty or more likely because of the [higher] VAT receipts," Mr Patelis told The Telegraph.
The revenue predicted is likely to be at the "lower end" of estimates and the country's banks will help impose the measures by reporting spending to the authorities.
If a Greek earned €1,000 per month and only paid 15 per cent of their income electronically, they would pay a fine of around €400 every year, for example. The government is confident it will not drive more workers into the country's booming shadow economy and tempt them to understate their earnings, a key problem in Greece.
Greeks can use debit cards, credit cards, bank transfers and ecommerce for the electronic transactions, which includes rent.
But many workers are paid their wages in cash, which they then use to pay their rent and bills. Greece also has one of the lowest internet usage rates in the EU at 72 per cent. This suggests that some in the country could struggle to meet the 30 per cent target.
Southern Europe, particularly Greece, have booming shadow economies. A study by the Institute for Applied Economic Research in 2017 found that Greece had the largest in the world, being equivalent to 22 per cent of gross domestic product.
Individuals and businesses are enticed to under report earnings and avoid taxation due to high rates and cumbersome bureaucracy.
The Greek government expects to raise more than €500 million each year from the initiative. Credit: AP
Tax evasion has been labelled a "Greek national sport" and it was estimated in 2016 to cost the country's coffers up to €16 billion every year, largely through fraud on VAT or income tax.
However, Mr Mitsotakis' government is cutting the tax burden of workers and businesses in an attempt to shock the Greek economy back into life.
Greece has returned to growth but its economy remains sluggish with output still a quarter below pre financial crisis levels.