Electronic payments are growing rapidly in Greece, contributing, among other things, to increased tax revenues from VAT. According to an IOBE study entitled “Electronic payments in Greece after the pandemic era”, between the years 2014 and 2022, the cumulative increase in the use of payment cards reaches 20 times in terms of number of transactions and 9 times in terms of transaction value.
Although the use of card transactions in Greece, as a proportion of private consumption, now converges with the European average, remains low in individual transaction categories. The recent expansion of card payments has been stronger in services than in goods, thus reducing the disparity in the relative usage mix.
The percentage of online transactions versus physical transactions increased from less than 1:5 to around 1:3 post-pandemic, as consumers continue to expand their use of plastic money for lower-value physical transactions.
The value of national payments via Greek cards exceeded the corresponding total of cash withdrawals for the first time in 2022. Although the diffusion of digital payments is proportionally stronger in purchases of goods than in services, the recent expansion of card payments has been stronger in services than in goods, thus reducing the disparity in the relative use mix.
Almost 40% of digital payment usage is now for services, compared to less than 20% in 2015, while services represent 45% of total household spending. Goods dominate physical card transactions, while services dominate online transactions.
Card payments have grown at different rates by industry and transaction type since the pandemic era. As an indication, restaurants and betting services are individual sectors where the percentage of spending on cards has increased significantly. At the same time, around 40% of the value of card payments is still spent on supermarkets, gas stations and utility bills.
Source of increased tax revenue
The growth of digital payments in Greece continued to have a significant positive impact on tax revenues even after the pandemic. The annual positive effect of the expansion of card payments on VAT revenue is estimated at around 600 million euros for 2022.
According to the study, it is estimated that every 10 euros spent with new cards in 2022 involved an average of 0.67 euros of previously undeclared VAT revenue. “Digital payments for professional services, education, healthcare, restaurants/bars and other services are estimated to be closely related to total VAT revenue,” according to IOBE.
Despite recent progress, Greece still has one of the largest VAT revenue gaps in the EU. Greater use of digital payments is associated with a smaller VAT gap across the EU.
The use of card transactions in Greece, in proportion to private consumption, reached the Eurozone average after the pandemic crisis. Despite convergence with the European average, the level of card usage in relation to private consumption in Greece remains the 19th lowest among the 27 EU members, as card usage remains proportionally low across categories of individual transactions. For this reason, it is crucial to further strengthen electronic payments.
Measures to increase electronic payments
IOBE estimates that there is still room to strengthen tax compliance through the targeted dissemination of electronic payments with measures such as:
- immediate return to the consumer of a percentage of the value of transactions directed electronically,
- extension of the incentive and disincentive mechanism for electronic payments (B2C and B2B) by professionals;
- link part of the self-employed person’s deductible expenses to their digital payment method, as well as
- direct the lottery to transactions with a high risk of tax evasion.