Brussels has placed Greece’s tax system back under scrutiny, highlighting tax exemptions, the VAT gap and diesel policy in the European Commission’s latest review of the country.
The review does not introduce binding measures and does not amount to a formal directive. However, it shows where the Commission sees structural weaknesses in Greece’s tax framework and where future policy changes could be considered.
While the Commission acknowledges Greece’s strong fiscal performance, it also points to areas that continue to affect public revenue, tax fairness and the country’s green transition. These include the large number of tax exemptions, the structure of energy taxation, the favorable treatment of diesel compared with gasoline and electricity, and the environmental pressure created by Greece’s aging vehicle fleet.
A central issue in the Commission’s assessment is the scale of Greece’s tax expenditures. These include exemptions, reductions and special tax treatments that reduce state revenue.
According to the review, Greece had 1,236 tax expenditures in 2024, with an estimated fiscal cost of €22.88 billion ($26,5 billion). The most important categories include exemptions for first homes, rental-related tax benefits, personal income tax, corporate taxation, reduced VAT rates and excise duties.
The Commission notes that Greece does not have an official mechanism to regularly evaluate whether these tax benefits are effective. By comparing both their number and cost with other EU countries, Brussels suggests that Greece could benefit from a more systematic review and rationalization of its tax exemptions.
VAT is another major area highlighted in the review. Although Greece has improved tax compliance, the Commission stresses that exemptions and reduced rates continue to weigh on revenue collection.
The VAT gap reached €9.4 billion in 2023, equal to 18.3 percent of potential VAT revenue. The Commission recognizes that the compliance gap has narrowed significantly, but it says progress has not been even across the economy.
The review points to exemptions that complicate the functioning of the VAT system, including those related to private education and financial services. It does not propose an immediate specific measure, but its wording leaves open the possibility of future restructuring.
The Commission also refers to persistent tax evasion in personal income tax, especially among self-employed workers and sectors where cash transactions remain common.
The issue is particularly visible in technical trades and services provided outside fixed business premises, where payments may be made directly and with limited electronic recording.
Although the Commission does not explicitly recommend a new measure in this area, its assessment suggests that existing tools aimed at addressing underreported income among freelancers and self-employed professionals are unlikely to be withdrawn soon.
Energy taxation receives some of the sharpest comments in the review. The Commission says Greece remains heavily dependent on fossil fuels, while electricity prices are higher than the EU average, partly because of the country’s reliance on natural gas.
The review argues that Greece’s current energy tax structure continues to favor fossil fuels over electricity, sending mixed price signals at a time when the EU is pushing for faster decarbonization.
Diesel is central to this concern. The Commission views the lower tax burden on diesel as a distortion, especially because diesel remains a key fuel for production and road transport in Greece.
The issue is politically sensitive. During the energy crisis, the Greek government supported diesel prices, with the impact estimated at an additional 15 to 20 cents per liter, in an effort to prevent further price increases. At the same time, public debate in Greece continues to include demands for deeper fuel tax cuts.
The Commission takes a clear position on diesel compared with gasoline and electricity. It notes that excise duties on diesel remain particularly low compared with gasoline, even though diesel is considered more harmful to the environment.
This does not mean that a diesel tax increase has been announced. The remarks form part of a broader review and recommendation process. Still, they indicate the direction of EU policy as the green transition becomes more central to national fiscal planning.
Over the next five years, the EU’s green transition agenda is expected to push member states toward measures such as higher excise duties on diesel, closer alignment between diesel and gasoline taxation, and vehicle taxes more closely linked to emissions.
Other possible policy tools include incentives for electric vehicles, purchase subsidies, tax deductions and changes to registration taxes designed to favor cleaner cars.
Vehicles are also part of the Commission’s assessment. The review notes that Greece has one of the oldest vehicle fleets in Europe, a factor that contributes to higher emissions and increases the need for policy intervention.
For Brussels, the issue is not only fiscal. Tax policy is also seen as a tool for influencing consumer behavior, encouraging the replacement of older vehicles and supporting the transition to cleaner transport.
The review therefore opens a wider debate over how Greece should balance fiscal stability, household costs, business needs and EU climate goals.
For now, no binding measures have been imposed. But the Commission’s review makes clear that Greece’s tax exemptions, VAT gap and diesel policy are likely to remain under European scrutiny.
