Greece records second-highest effective tax burden on labor in the EU, new KEFiM analysis finds

Based on the latest available Eurostat data, the study titled “Effective Taxation on Consumption and Labor” examines the long-term evolution of Greece’s real tax burden in comparison with other EU member states.

Labor Taxation Far Above the EU Average

The analysis reveals that Greece’s effective tax rate on labor reached 40.5% in 2023, placing the country second among all 27 EU member states, surpassed only by Italy. This figure exceeds the EU average by 3.5 percentage points, highlighting a persistent structural shift in labor taxation since the pre-crisis period.

Despite reductions in nominal income tax rates and social security contributions after 2019, the overall real tax burden on labor remains exceptionally high.

According to KEFiM, this is largely driven by:

• High inflation
• Lack of indexation of tax brackets
• Fiscal drag, which pushes taxpayers into higher tax brackets without a real increase in purchasing power
• Consumption Taxes Also Higher Than the EU Mean

Greece’s effective tax rate on consumption stood at 17.8% in 2023, 2.4 percentage points above the EU average. While Greece ranks 14th overall, the comparison with 2009 shows a clear transition from a low-tax to a permanently higher consumption tax regime.

Expert Warning: Tax Cuts Only Offset Inflation

Commenting on the findings, Miranda Xafa, PhD economist and member of KEFiM’s Scientific Council, stated:

“The KEFiM study clearly demonstrates the sharp increase in Greece’s tax burden during the 2010–2018 crisis, which has not been reversed since.

Labor taxation—especially for middle and high income earners—remains excessive, even after recent income tax cuts. In practice, these reductions merely offset the cumulative inflation of the past four years, which exceeded 20% and pushed households into higher tax brackets without any real gain in purchasing power.”

Xafa emphasized that KEFiM has consistently advocated for either a flat tax system or, at minimum, a significant reduction in tax progressivity, arguing that the current structure discourages the attraction of skilled professionals and exacerbates brain drain.

About KEFiM

The Center for Liberal Studies – Markos Dragoumis (KEFiM) is an independent, non-partisan think tank promoting economic freedom, individual liberty, and structural reform in Greece through research, policy publications, and public debate.