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Fifteen years after the start of the financial crisis, labor in Greece remains one of the most heavily taxed in the European Union.
Despite the return of the economy to stability, workers and households continue, for various reasons, to bear a disproportionately high tax burden. Taxes and social security contributions absorb a large part of income from work, limiting purchasing power and making Greece among the countries with the highest taxation of labor in Europe.
The data on the evolution of real taxation of labor (taxes and social security contributions) are revealing. According to the analysis of the Center for Liberal Studies (KEFIM), Greece is currently in second place among the EU states in terms of the real tax burden on labor, behind Italy. High taxation is no longer an exceptional measure like during the bailout period, but a structural feature of the economy, with significant effects on purchasing power, competitiveness and incentives to work.
In 2009, Greece taxed labor significantly less than the EU average, with an effective tax rate of 35%, compared to 36.9% in the EU. This difference indicated an economic model that relied more on consumption and borrowing and less on the stable production of tax revenues. The turning point came in 2012, when, in the midst of a deep recession and fiscal suffocation, the effective tax rate on labor jumped to 39.5%, up 4.5 percentage points in just three years and higher than the European average. This specific choice was necessary as increasing taxes was the main tool for dealing with the fiscal crisis.
The following years did not reverse this shift. In 2015, a mild de-escalation was recorded, but without a return to pre-crisis levels, while in 2019 the effective tax rate reached 40.2%. In 2023 it reached 40.5%, almost the same as the pre-pandemic levels largely due to high inflation and the movement of taxpayers to higher brackets without a real increase in income.
Compared to 2009, the burden on labor has increased by 5.5 percentage points, while compared to the EU average, Greece taxes labor by about 3.5 points more.