Who Pays Indirect Taxes in Greece? From EU Entry to the Fiscal Crisis

Abstract

The article applies microsimulation modeling techniques exploiting five waves of Household Expenditure Survey (HES) data in order to study how the distributional impact of indirect taxes in Greece has changed over the last twenty-five years (1988–2011). It turns out that the radical simplification of the tax system, primarily induced by European Union (EU) membership, was achieved at a small cost in terms of equity. The recent successive fiscal consolidation packages, adopted in response to the fiscal crisis, involved major indirect tax hikes that significantly increased the indirect tax burden for Greek households. The 2011 indirect tax system appears as the most regressive along the period studied, both in terms of its effect on inequality and in terms of unfavorably targeting distributionally sensitive commodities. The impact of the reforms was particularly adverse for vulnerable population groups like families with children (especially the poorest ones) and the unemployed. For austerity not to further challenge social cohesion, policy measures have to be planned in a more informed manner.