The Relationship between Taxation Levels and Economic Growth in Greece: Comparison with Selected Countries
Purpose: The purpose of this paper is to examine the effect of taxation levels on the economic growth of Greece over a period and compare the results with other European countries. A theoretical model connecting taxation rates, revenue and economic growth is difficult to apply because of the multitude of legislation acts, regulations, exemptions, and reforms regarding taxation. Design and Methodology: In the paper the percentage of direct, indirect, and environmental taxes to GDP, as well as the implicit taxation rates for consumption and labor are examined as to how they affect the GDP and GDP per capita growth rate for Greece, Germany, Italy, and Portugal over the period from 1995 to 2018. Findings: The results show that any increase or decrease in these taxation figures has a different effect on the economies of these countries because of the inherent differences in each economic environment. Practical implications: The common conception that high tax rates have a negative effect on the economy seems to apply only for the steady and growing German economy. For the Greek and the Portuguese economies, depression, external debt and changes in legislation and reforms add more factors that influence the economic growth and sometimes reverse the result. Originality/Value: While many studies have investigated the effect of taxation rates on the economic growth, the originality of this paper lies in the fact that it deals with the same subject specifically for Greece and compares the results with other European Union countries.