Greece’s illegal economy amounts to approximately 16-18% of the country’s gross domestic product, according to the State Parliamentary Budget Office (PBO) that calculates the shadow economy based on data from 2023, which means it was approximately 40 billion euros.
This estimate, which PBO coordinator Yiannis Tsoukalas made in response to a question during the presentation of the office’s quarterly report, is compatible with the data for the declared income of that year, €110 billion, and consumption, which was €151 billion.
The International Monetary Fund recently made a similar estimate for the illegal economy at 16% of GDP, while Minister of National Economy and Finance Kyriakos Pierrakakis said earlier this month, in a speech in Paris, that it was at 15% of GDP.
In any case, although it remains at high levels, the data cited by the fund show it has fallen significantly from the 30% of GDP it was in 2013. In the early 2020s, it is estimated that it was contained at 20-21% of GDP.
The contraction of the shadow economy is linked to the increase in VAT revenues and overall tax revenues. Tsoukalas said that the VAT gap may now be below 10% of GDP, from 13.5% in 2022, based on European Commission data, approaching the EU average of 7% of GDP. He noted that currently VAT revenues are growing at a rate of 9% against a budget target of 4.5%. If they reach the EU average, which may happen this year, tax revenues will increase by €1 billion, creating additional fiscal space for tax cuts in 2027.
According to Tsoukalas, priority should be given to tax cuts for employees. He stated that the highest rate of 44% is imposed on a very low income, €40,000, while the step between the low rate of 9% (for incomes up to €10,000) and the next highest rate of 22% should be smoothed out. He once again opposed the change in indirect taxes, saying that they would go into the pockets of businesses, and argued that after tax cuts, what needs to be done is to boost public investment.