Greece: Greece progresses in tax policy-making realm

Setting aside the extended recent harmonisation of Greek tax law with the BEPS project, Greece has made remarkable progress with its tax policies, through various legislative actions taken during the past few years.

To name a few, first, it has modified the law in order to prohibit explicitly the retroactive application of the Internal Revenue Service's (IRS) "change of tax position". Official interpretations through circulars and guidelines, which embed a change of position in any tax matter, may only apply for the future, and taxpayers no longer face the risk of suffering taxes and penalties for having followed a different approach, as was the case in the past.

Secondly, it has been explicitly clarified that book-to-tax adjustments, namely the taxes which customarily may be imposed by the tax authorities in the future on disallowed expense items are disregarded for tax avoidance purposes. The Greek administration essentially clarified the self-evident fact that book-to-tax adjustments should not be equated with a deliberate illegal attempt by a taxpayer to evade assessment or payment of a tax. The uncertainty on this matter, although very arbitrary, had in the past, led to significant problems in the market by diminishing the defence position of taxpayers.

Thirdly, again in the context of resolving uncertainty, the tax administration made clear through guidelines, that stamp tax, the imposition of which usually involves very significant amounts, is not included in the criminal tax evasion offence. Criminal tax evasion may result in fines and imprisonment, consequently the previous uncertainty – to some – led to the acceptance of stamp tax assessments in numerous arbitrary cases. In addition to the above, recent changes in law have put in place the fundamental principles for the application of the general anti-avoidance rule (GAAR) by the Greek tax authorities. Before this amendment, the tax authorities had a disproportionate advantage against defenceless, in some cases, taxpayers, because they could make GAAR judgments in a very discretionary fashion. Under the new set of rules, the tax administration has the burden of proof that an arrangement is artificial. For evaluating this, it should also examine whether the arrangement in question is featured in the indicative cases included in the EU Recommendation 772/2012. Also, it should interpret the GAAR in accordance with the domestic law, European Court of Justice (ECJ) case law and EU recommendations.

In addition to the above examples of reform, it should also be highlighted that the Greek tax administration, during the last years, has officially and bindingly aligned with the Supreme Court decisions on the statutes of limitation (five years is the general statute of limitation (SOL) rule), putting an end to the historical anti-constitutional endless extensions of the statutes of limitation. Last, but not least, the Independent Authority for Public Revenue has enlisted a number of young, knowledgeable and experienced professionals who staff the various functions and who can adequately cope with the rapidly changing and challenging tax and economic environment.

All the above, together with automation, have contributed enormously to changing the Greek tax environment and improving the trustworthiness, reliability and transparency of the Greek tax system. It is a task to turn Greece into an investor-friendly and stable marketplace, and taxation is one of the main areas that required significant improvement, especially with regards to legal uncertainty and volatility. Things may not be perfect, but they are certainly significantly improved in comparison with the past and the recent changes have played a key role in that. These, apart from all the technical merits, increase transparency and ban corruption, which is a fundamental goal of an advanced tax system. It is not by chance that Greece in 2018 ranked 67th out of 180 in the Corruption Perception Index, which is the leading global indicator of public corruption. It scored 45 (on the 0 – 100 score measurement in which 0 is "highly corrupted" and 100 is "very clean") versus 36 in 2012. While there is still room for improvement, there are signs of genuine intention and effort. "I believe things cannot make themselves impossible", said theoretical physicist Stephen Hawking and this is probably Greece's approach.

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