An Alternative Proposal for VAT on Consumption in Greece

Authors

  • G. Kalliampakos National Observatory of Athens, Lofos Nymphon, GR-11810 Athens, Greece; on provisional leave to the Hellenic Parliament, Vas. Sofias 2, GR-10021 Athens, Greece
  • E. Kotzamani Ministry of Finance, Karagiorgi Servias 10, GR-10562 Athens, Greece; on provisional leave to the Hellenic Parliament, Vas. Sofias 2, GR-10021 Athens, Greece

Keywords:

VAT Rates, Consumption, Elasticity of Demand, Tax Revenue, Greece

Abstract

It is well established that a reduction in consumption VAT rates during an economic crisis, followed by the introduction of a single VAT rate rather than multiple rates, may significantly increase tax revenues through improved collectability of VAT due to increased consumption as well as reduction of tax evasion and avoidance. This paper presents the economic impact on the Greek economy of the establishment of a basic VAT rate of 20 per cent for most consumer goods and services, with a reduced VAT rate of 10 per cent for certain socio-economically important goods and services.

References

Adam, A., & Moutos, T. (2014). Industry-level labour demand elasticities across the Eurozone. Working paper for the Bank of Greece. Retrieved from http://www.bankofgreece.gr/BogEkdoseis/Paper2014185.pdf

Albouy, D., Ehrlich, G., & Liu, Y. (2014). Housing demand and expenditures: How rising rent levels affect behavior and costs-of-living over space and time. Research paper. Retrieved from https://pdfs.semanticscholar.org/b13c/b8945fd5ea0247d925bd02a94d00f21e17f5.pdf

Anderson, P.L., McLellan, R.D., Overton, J.P., & Wolfram, G.L. (1997). The Universal Tuition Tax Credit: A Proposal to Advance Parental Choice in Education. Midland, MI: Mackinac Center for Public Policy. Retrieved from https://www.mackinac.org/1247

Andreyeva, T., Long, M.W., & Brownell, K.D. (2010). The impact of food prices on consumption: A systematic review of research on the price elasticity of demand for food. American Journal of Public Health, 100(2), 216-222.

Artavanis, N.T. (2015). VAT rates and tax evasion: Evidence from the restaurant industry in Greece. Research paper, University of Massachusetts Amherst Department of Finance. doi:10.2139/ssrn.2585147

AUEB (2015). The mobile communications industry as a main pillar in the growth strategy of the Greek economy. Research presentation, Athens University of Economics and Business, Athens, Greece. Retrieved from http://www.eekt.gr/ENSection/tabid/123/language/el-GR/default.aspx

Bank of Greece (2014). Monetary Policy Interim Report. Athens, Greece: Bank of Greece. Retrieved from http://www.bankofgreece.gr/BogEkdoseis/Inter_NomPol2014_en.pdf

Bank of Greece (2016). Monetary Policy Interim Report (in Greek). Athens, Greece: Bank of Greece. Retrieved from http://www.bankofgreece.gr/BogEkdoseis/Inter_NomPol2016.pdf

Barbone, L., Belkindas, M.V., Bettendorff, L., Bird, R., Bonch-Osmolovskiy, M., & Smart M. (2013). Study to Quantify and Analyze the VAT Gap in the EU Member States: Final Report. The Hague, Netherlands: CPB Netherlands Bureau for Economic Policy Analysis. Retrieved from https://ec.europa.eu/taxation_customs/sites/taxation/files/docs/body/vat-gap.pdf

Barbone, L., Bird, R.M., & Vazquez-Caro, J. (2012). The costs of VAT: A review of the literature. Working paper 12-22, International Center for Public Policy, Atlanta, GA.

Barbone, L., Bonch-Osmolovskiy, M., & Poniatowski, G. (2014). 2012 Update Report to the Study to Quantify and Analyze the VAT Gap in the EU-27 Member States. Warsaw, Poland: CASE Network. Retrieved from http://www.case-research.eu/sites/default/files/publications/CNR_120.pdf

Barbone, L., Bonch-Osmolovskiy, M., & Poniatowski, G. (2015). Study to Quantify and Analyze the VAT Gap in the EU Member States: 2015 Report. The Hague, Netherlands: CPB Netherlands Bureau for Economic Policy Analysis. Retrieved from https://ec.europa.eu/taxation_customs/sites/taxation/files/docs/body/vat_gap2013.pdf

Boeters, S., Böhringer, C., Büttner, T., & Kraus, M. (2006). Economic effects of VAT reform in Germany. Discussion Paper No. 06-030, Centre for European Economic Research, Mannheim, Germany. Retrieved from ftp://ftp.zew.de/pub/zew-docs/dp/dp06030.pdf

Borselli, F., Chiri, S., & Romagnano, E. (2012). Patterns of reduced VAT rates in the European Union. International VAT Monitor, 23(1), 13-21.

Bye, B., Strom, B., & Avitsland, T. (2003). Welfare effects of VAT reforms: A general equilibrium analysis. Discussion Paper No. 343, Research Department, Statistics Norway, Kongsvinger, Norway. Retrieved from http://www.ssb.no/a/publikasjoner/pdf/DP/dp343.pdf

Campbell, R., & Siegel, B.N. (1967). The demand for higher education in the United States, 1919–1964. The American Economic Review, 57(3), 482-494.

Candela, G., & Figini, P. (2012). The Economics of Tourism Destinations. Berlin, Germany: Springer Verlag.

Center of Planning and Economic Research (2014). Tax policy on tobacco products, public revenues and smuggling in Greece. Retrieved from http://www.fpress.gr/diafora/item/18348

D’Angelo, F., Furia, D., Crociata, A., & Castagna, A. (2010). Education and culture: Evidence from live performing arts in Italy. Procedia Social and Behavioral Sciences, 9, 1373-1378.

Department of Infrastructure and Regional Development (n.d.). Elasticities Database Online. Canberra, Australia: Department of Infrastructure and Regional Development, Australian Government. Available at http://bitre.gov.au/tedb/tableList.aspx

FAO (2003). Agricultural commodities: Profiles and relevant WTO negotiating issues. Paper prepared by the Food and Agriculture Organization of the United Nations for the Consultation on Agricultural Commodity Price Problems, Rome, Italy, 25-26 March 2002. Retrieved from http://www.fao.org/docrep/006/y4343e/y4343e00.htm

Foundation for Economic and Industrial Research (2014). Evaluation of the current taxation regime for tobacco products in Greece. Research paper, Foundation for Economic and Industrial Research, Athens, Greece. Retrieved from http://iobe.gr/research_dtl_en.asp?RID=92

Foundation for Economic and Industrial Research (2015). Food and beverages industry: Facts and figures 2014 (in Greek). Research study, Foundation for Economic and Industrial Research, Athens, Greece. Retrieved from http://iobe.gr/research_dtl.asp?RID=105

Fouquet, R. (2012). Trends in income and price elasticities of transport demand (1850–2010). Energy Policy, 50, 62-71.

Gratziou, M., & Andreadaki, M. (2005). Water demand and pricing policy in the municipal supply enterprise of Xanthi (in Greek). Proceedings of the 5th International Conference on Environmental Technology, Athens, 3-6 February. Retrieved from http://library.tee.gr/digital/m2045/m2045_gratsiou1.pdf

Gratziou, M., Andreadaki, M., & Tsalkatidou, M. (2006). Water demand and rates policy in provincial cities in Greece. European Water, 15/16, 33-44.

Hakim, R. (2009). Finding the right VAT rate. Research paper, Southeast Asian Tax Justice Network. Retrieved from http://somo.nl/dossiers-en/economic-reform/tax-justice/ttj/documents/finding-the-right-vat-rate

Hall, R.E. (2005). Guidelines for tax reform: The simple, progressive value-added consumption tax. In K.A. Hassett, & A.J. Auerbach (Eds), Toward Fundamental Tax Reform (pp.70-80). Washington, DC: AEI Press.

Hellenic Parliament (2015). Comparative study on Indirect Taxation in EU: The Case of Reduced VAT Rates in Aegean Islands. Parliamentary Budget Office, 4th Interim report. Retrieved from http://www.pbo.gr/Reports/tabid/1085/ArtMID/5207/ArticleID/8969/language/en-GB/Default.aspx

HSA (2010–2014). Household Budget Surveys. Athens, Greece: Hellenic Statistical Authority. Retrieved from http://www.statistics.gr/en/statistics/-/publication/SFA05

HSA (2015). Greece in Figures. Athens, Greece: Hellenic Statistical Authority. Retrieved from http://www.statistics.gr/documents/20181/301069/GreeceInFigures_2015Q3_EN.pdf/23505e12-a174-4d87-8e98-433cdebe26b3

Hayoz, N., & Hug, S. (2007). Tax Evasion, Trust and State Capacities. Bern, Switzerland: Peter Lang AG.

INEMY (2013). Price developments in retail (in Greek). Research paper, Institute of Commerce (INEMY), Athens, Greece. Retrieved from http://www.pcci.gr/evepimages/INEMY230413_F13968.pdf

Kulis, D. (2003). Developments in the Croatian tax system. Institute of Public Finance of Croatia Newsletter, 14. Retrieved from http://www.ijf.hr/eng/newsletter/14.pdf

Lechene, V. (2000a). Income and Price Elasticities of Demand for Food Consumed in the Home: Report of the National Food Survey Committee. London: HMSO. Retrieved from http://statistics.defra.gov.uk/esg/publications/nfs/2000/Section6.pdf

Lechene, V. (2000b). Income and price elasticities of demand for meat, meat products and fish. In National Food Survey Committee, Annual Report on Food Expenditure (pp. 87-110). London: HMSO.

Litman, T. (2013). Understanding transport demand and elasticities: How prices and other factors affect travel behavior. Research paper, Victoria Transport Policy Institute, Victoria, Canada. Retrieved from http://www.vtpi.org/elasticities.pdf

Litman, T. (2016). Transit price elasticities and cross elasticities. Research paper, Victoria Transport Policy Institute, Victoria, Canada. Retrieved from http://www.vtpi.org/tranelas.pdf

Maniatis, G., & Danchev, S. (2013). Equating the excise duty rates on heating and diesel oil (in Greek). Research paper, Foundation for Economic and Industrial Research, Athens, Greece. Retrieved from http://iobe.gr/research_dtl.asp?RID=47

Martinez, L.A. (2012). The country-specific nature of apparel elasticities and impacts of the multi-fibre arrangement. Economics Honors Project 49, Macalester College, St Paul, MN. Retrieved from http://digitalcommons.macalester.edu/cgi/viewcontent.cgi?article=1049&context=economics_honors_projects

McConnell, C.R., Brue, S.L., & Flynn, S.M. (2012). Economics: Principles, Problems, and Policies, 19th ed. New York, NY: Mc Graw Hill.

Meyerhoefer, C.D., & Zuvekas, S. (2006). New estimates of the demand for physical and mental health treatment. Working Paper No. 06008, Agency for Healthcare Research and Quality, Washington, DC. Retrieved from http://gold.ahrq.gov

Ministry of Development and Competitiveness (2013). Annual Report on Price Developments (in Greek). Athens, Greece: Ministry of Development and Competitiveness. Retrieved from in http://www.epimlas.gr/cms/wp-content/uploads/Exelixi_timon_2013.pdf

Mirrlees, J., Adam, S., Besley, T., Blundell, R., Bond, S., Chote, R., Gammie, M., Johnson, P., Myles, G., & Poterba, J.M. (2011). Broadening the VAT base. In Mirrlees et al., Tax by Design (pp.216-230). Oxford: Oxford University Press.

Nilsson, I., & Wadeskog, A. (1998). Distributional effects of an increase in the carbon tax within a partial equilibrium framework: The case of Sweden. Paper prepared for Environmental Fiscal Reform Project (ENV4-CT 96-0228), EC Environment and Climate Research Programme, Brussels, Belgium.

OECD (2010a). Tax Policy Reform and Economic Growth. Paris, France: OECD Publishing.

OECD (2010b). Choosing a Broad Base: Low Rate Approach to Taxation. Paris, France: OECD Publishing.

OECD (2016a). OECD Economic Surveys: Greece 2016. Paris, France: OECD Publishing.

OECD (2016b). Consumption Tax Trends 2016: VAT/GST and Excise Rates, Trends and Policy Issues. Paris, France: OECD Publishing.

Okrent, A.M., & Alston, J.M. (2012). The demand for disaggregated food-away-from-home and food-at-home products in the United States. USDA-ERS Economic Research Report No. 139, Washington, DC. Retrieved from http://ageconsearch.umn.edu/bitstream/132469/2/err139.pdf

Parker, J. (2010). Case of the day: Elasticity of demand for higher education. Reed College, Portland, OR. Retrieved from https://www.reed.edu/economics/parker/f10/201/cases/elasticity.html

Pavlou, G., Maniatis, G., & Danchev, S. (2011). The spirits sector in Greece: Problems and prospects. Research paper, Foundation for Economic and Industrial Research, Athens, Greece. Retrieved from http://iobe.gr/docs/research/en/res_05_b_23122011rep_eng.pdf

Poniatowski, G., Bonch-Osmolovskiy, M., & Belkindas, M. (2016). Study and Reports on the VAT Gap in the EU-28 Member States: 2016 Final Report. Vienna, Austria: IHS, Institute for Advanced Studies. Retrieved from https://ec.europa.eu/taxation_customs/sites/taxation/files/2016-09_vat-gap-report_final.pdf

Remeta, J., Perrett, S., Jareš, M., & Brys, B. (2015). Moving beyond the flat tax: Tax policy reform in the Slovak Republic. OECD Taxation Working Paper No. 22, Paris, France. doi:10.1787/5js4rtzr3ws2-en

Rizov, M., Cupak, A., & Pokrivcak, J. (2014). Food demand and consumption patterns in Slovakia. Paper presented at the EAAE 2014 Congress, “Agri-Food and Rural Innovations for Healthier Societies”, Ljubljana, Slovenia, 26-29 August. Retrieved from http://ageconsearch.umn.edu/bitstream/182825/2/Food_demand_Slovakia_3_eaae2014.pdf

Rizov, M., Cupak, A., & Pokrivcak, J. (2015). Food demand and consumption patterns in the new EU member states: The case of Slovakia. Ekonomicky Casopis, 63, 339-358.

Selim, S. (2007). On policy relevance of Ramsey tax rules. Economics Discussion Paper 2007-31, University of Westminster, London. Retrieved from http://westminsterresearch.wmin.ac.uk/17992/1/file.pdf

Sinai, T. (2007). Urban housing demand. Paper prepared for the New Palgrave Dictionary of Economics. Retrieved from http://realestate.wharton.upenn.edu/research/papers/full/624.pdf

Skintzi, G. (2015). Study on the profitability of VAT revenues (in Greek). Research Paper No. 19, Centre of Planning and Economic Research, Athens, Greece. Retrieved from http://www.kepe.gr/index.php/en/research/recent-publications/articles-on-greek-economy

Stergiou, L. (2005). Inelasticity triggers product prices (in Greek). Ekathimerini.com, 5 June. Retrieved from http://www.kathimerini.gr/219437/article/oikonomia/epixeirhseis/h-anelastikothta-pyrodotei-tis-times-twn-proiontwn

Tarantilis, F., Athanasakis, K., Zavras, D., Vozikis, & Kyriopoulos, I. (2015). Estimates of price and income elasticity in Greece: Greek debt crisis transforming cigarettes into a luxury good – an econometric approach. BMJ Open, 5(1). doi:10.1136/bmjopen-2013-004748

Tiffin, R., Balcombe, K., Salois, M., & Kehlbacher, A. (2011). Estimating food and drink elasticities. Research paper, University of Reading, Reading. Retrieved from https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/137726/defra-stats-foodfarm-food-price-elasticities-120208.pdf

Vedder, R. (2010). The elasticity of demand and student access. The Center for College Affordability and Productivity [blog]. Retrieved from http://collegeaffordability.blogspot.gr/2010/01/elasticity-of-demand-and-student-access.html

Wintrobe, R., & Gërxhani, K. (2004). Tax evasion and trust: A comparative analysis. Proceedings of the Annual Meeting of the European Public Choice Society, Berlin, 15-18 April. Retrieved from http://www.diw.de/documents/dokumentenarchiv/17/41525/Paper-214.pdf

Volume 4.1 of JOTA - Kalliampakos and Kotzamani Cover

Downloads

Published

08-05-2018

How to Cite

Kalliampakos, G., & Kotzamani, E. (2018). An Alternative Proposal for VAT on Consumption in Greece. Journal of Tax Administration, 4(1), 55–80. Retrieved from https://jota.website/jota/article/view/96