Greeks who fail to spend 30% of their income electronically will be hit with a 22% fine on the shortfall. If an individual spends just 20% of their income through electronic means, they would face a 22% tax on the remaining 10%.

By Ian Horswill


Posted on December 10, 2019

The Prime Minister of Greece Kyriakos Mitsotakis, who since being elected on 8 July 2019 has issued a series of measures to lift the country’s moribund economy. The plan involves forcing its population to spend almost a third of their income electronically or risk being fined.

Kyriakos Mitsotakis‘ move is to try to end the rampant tax evasion that takes place in Greece. Tax evasion is known as the country’s “national sport” and Greece has Europe’s largest shadow economy.

Mitsotakis’ government expects to raise more than €500m every year from the initiative to force Greeks to spend 30% of their income electronically, Alex Patelis, the prime minister’s chief economic adviser, told The Telegraph.

People who fail to meet the target will be hit with a 22% fine on the shortfall. If an individual spends just 20% of their income through electronic means, they would face a 22% tax on the remaining 10%.

“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,” Patelis said. The revenue predicted is likely to be at the “lower end” of estimates and the country’s banks will help to impose the measures by reporting spending to the authorities.

If a Greek earned €1,000 per month and only paid 15% of their income electronically, they would pay a fine of around €400 every year, for example. The government is confident that the policy will not drive more workers into the country’s booming shadow economy and tempt them to understate their earnings, a major issue in Greece.

Greeks can use debit cards, credit cards, bank transfers and e-commerce for the electronic transactions, which includes rent.

Many workers in Greece are paid their wages in cash, which they then use to pay their rent and bills.

Many countries in southern Europe have booming shadow economies with Greece among the worst, though the scale of underground activity can only be measured indirectly. According to a 2017 published study published by the Institute for Applied Economic Research at the University of Tübingen in Germany, the Greek shadow economy is estimated to average 21.5% of GDP. Its fellow southern European states of Italy and Spain had shadow economies of 19.8% and 17.2% of GDP respectively.

Mitsotakis’ policies have returned Greece to growth but its economy remains sluggish with output still a quarter below pre-financial crisis levels.