In 2012 the poorest 20% of taxpayers declared up to 4,000 euros in income, while in 2021 the corresponding 20% had an annual income of up to 1,016 euros. “Signal” for inequalities.
“Bell” for her increasing inequalities and the risk of poverty slams the Economic & Industrial Research Foundation (IOBE) in its report on the course of the economy in the first quarter of 2024, where it includes a special analysis entitled “progressiveness in the taxation of declared income in Greece, 2012-2021”. As the Institute records, a large part of the population was on the poverty line in the decade 2012-2021, as shown by the tax contribution of citizens.
In fact, as it states, the bottom 40% of the population paid 1.63% of total taxes, being in the two lowest income quintiles, defined by incomes up to 6,098 euros.
It should be noted that the poverty lineaccording to ELSTAT’s categorization for 2021, amounted to €5,712 per year for a one-person household and €11,995 for households with two adults and two dependent children under the age of 14.
As the IOBE study notes in particular, “the effect of the economic crisis on the incomes of Greek citizens was great. In addition to the decrease in incomes, in absolute terms, there was also a significant decrease in purchasing power since inflation did not decrease in proportion to incomes. In addition, using data from incomes declared to the tax authorities, IOBE reports that some indicators of inequality worsened, such as that the total income of lower (higher) paid citizens decreased (increased) as a percentage of total income.
Down 7.2%
Characteristically, IOBE, using the publicly available data of the Independent Public Revenue Authority (AADE) on the incomes and taxation of natural persons and comparing the year with the most available data (2021) with the oldest available data (2012), states that declared incomes (real income from all sources) in 2021 compared to 2012 they were lower by 7.2%. Also, by dividing the population into quintiles, for 2021, 20% are included in the lowest income quintile, which includes those with incomes up to 1,016 euros. The top 20% includes those with an income of 19,312 euros and above.
Also making use of the Eurostat price index to be able to compare the incomes of different years with each other (the price level was slightly lower in 2021 than in 2012); the study observes that the effect of the economic crisis on the incomes of citizens was significant.
“We also notice that, based on the data of incomes declared to the tax authorities, a large percentage of the population is at the poverty line, which according to ELSTAT’s categorization for 2021, amounted to €5,712 per year for a one-person household and in €11,995 for households with two adults and two dependent children under the age of 14.”
Presenting, in fact, the total declared income per quintile and the corresponding total tax burden, for 2012 it states that based on declared incomes, high levels of income inequality are observedsince the bottom 20% received only 1.4% of the total income, while the top 20% received 52.6% of the total income of Greece.
In the 57th position of inequalities
According to IOBE, the Gini inequality index estimated by the World Bank, ranks Greece in 57th place worldwide for 2021. Given that the tax system in Greece is progressive (that is, tax rates increase as income increases) it is not surprising that the overall tax burden is increasing, partially smoothing out inequality, the Institute emphasizes.
According to IOBE, also, the degree of progressivity based on assessed taxes is remarkable, since the bottom 40% of the population paid 1.63% of total taxes, while the top 20% paid 76.84% of total taxes.
Comparison with 2012
“Increased levels of income inequality are observed compared to 2012, since the bottom 20% received just 0.2% of total income (compared to 1.4% in 2012) while the top 20% received 58.7% of total income ( against 52.6% in 2012) of Greece” states the IOBE study and adds:
“The increase in taxes payable is corresponding, with 60% of the population pay only 4.3% of total income taxes, while 20% of the population pays 81% of total taxes. In conclusion, the economic crisis that the country went through had a negative and significant impact on citizens’ incomes and the impact has not yet been overcome.”
In addition, based on the income declared to the tax authorities, income inequalityobtained by comparing the distribution of shares of total income, exacerbated despite the current system of progressive taxation, states the IOBE study. In fact, despite a slight decrease in the progressivity of total income taxation over the last decade, as the report states, there has been a systematically increased level of progressivity, with citizens with the highest declared incomes bearing a disproportionately high share of total taxes
The government
In the meantime, based on a government announcement issued on April 4 on the occasion of ELSTAT’s data on economic inequality and poverty for 2022, an improved picture is recorded.
As the announcement stated, “2022, the reference year to which the ELSTAT figures refer, was a year of unexpected inflation explosion due to the great energy shock caused globally by the Russian invasion of Ukraine. In earlier periods, in similar circumstances we usually had an explosion of income inequality and poverty in our country. Because of the government’s policies – raising the minimum wage, income support for the most vulnerable sections of the population, development policies that led to a large reduction in unemployment – this was prevented.”
According to ELSTAT data, between 2021 and 2022 inequality (Gini index from 31.4 to 31.8) and the percentage of the population at risk of poverty (from 18.8% to 18.9%) increased slightly while, on the contrary , a small improvement is observed in the percentage of the population at risk of poverty or social exclusion (from 26.3% to 26.1%). That the government’s policies protected the most vulnerable strata of the population is also proven by the fact that between these two years the income share of the poorest 25% of the population increased slightly (from 10.3% to 10.4%), while the the so-called “poverty gap” that shows how poor our poor fellow citizens are has decreased significantly, from 23.8% to 22.5%.
At the same time, a shift of workers to higher wage scalesas shown in the diagram.
Consequently, in recent years Greece, in a very difficult period of intense inflationary pressures and “gnawing away” at the purchasing power of citizens, has achieved high growth, wage growth and a reduction in unemployment without widening inequalities.
We continue the same successful economic policy, which through the increase in employment and the increase in wages, leads to an improvement in the standard of living of Greek men and women, and strengthening of social cohesion” the announcement concluded.
