Illegal trade a growing revenue drain
Budget execution data for January-May 2016 suggest that tax revenues in Greece from tobacco and alcohol are growing in 2016 when compared with those of 2015, according to part of an EU Commission answer given last month to a written parliamentary question raised in June.
Despite this increase in tax revenues however, the illegal trafficking of alcohol and tobacco was a very significant, and potentially growing drain on public revenues in Greece, the Commission conceded.
The question was raised by the Greek MEP Georgios Epitideios, who, in a preamble, said that, according to the Greek press, high taxes on alcohol and tobacco were causing a massive increase in the trafficking of these items and a corresponding reduction in state revenue, which fell by 3.5 percent between 2014 to 2015 as a result of a switch towards bulk purchasing of these items by consumers.
‘Trafficking and bulk sales of spirits (especially ouzo, tsipouro and tsikoudia) are now extending to wine, which is subject to a special excise duty,’ Epitideios wrote. ‘One in five cigarette packs in Greece is being sold illegally, with millions being lost in unpaid duties. According to the Greek Federation of Spirits Producers, state revenues have been steadily declining.’
Epitideios asked, given that the increase in excise duty on tobacco, cigarettes and alcohol had been imposed on the recommendation of the Commission, could it say when action would be taken to remedy this ‘obviously mistaken policy’, which was resulting in the erosion of state revenue and an increase alcohol and tobacco trafficking?
The Commission replied that the package of tax increases on alcohol and tobacco recently introduced in Greece had not been recommended by the Commission but had been proposed by the Greek government to enable it to meet the medium-term fiscal targets it had agreed with the European Stability Mechanism, the Commission and the European Central Bank when the third economic adjustment programme was approved in August 2015.
‘The Commission believes that combatting smuggling is a core component of the broader fight against tax evasion in Greece, which itself is essential to generate the needed revenues and ensure the economic and social sustainability of the country’s fiscal consolidation agreed under the third adjustment programme,’ the Commission said.
‘It is for that reason that the Supplemental Memorandum of Understanding signed by the Greek government on 16 June 2016 in the context of the first review of the European Stability Mechanism programme includes a number of actions in that field to pursue and expand the efforts against smuggling undertaken over the past years.
‘The timely and consistent implementation of those actions will be supported with technical assistance from the Commission’s Structural Reform Support Service and monitored closely in the context of the programme reviews.’
