The fiscal performance of the Hellenic Republic (Greece, rated BBB with a positive outlook) has been comparatively strong in recent years, with Greece among the few countries in the European Union (EU) to have recorded repeated primary fiscal surpluses, the rating agency says in an analysis.
Its analysis highlights the important role of structural reforms to the country’s tax administration in improving fiscal outcomes. These reforms broadened the tax base and strengthened tax compliance, helping to drive a significant increase in government revenue, particularly from value added tax (VAT) and income tax.
This structural improvement on the revenue side has, in turn, strengthened Greece’s fiscal resilience and its ability to absorb higher government borrowing costs as sovereign bond yields rise.
Public finances strengthen
Greece’s fiscal performance is now significantly stronger than that of most EU countries. In 2025, the general government primary surplus reached 4.9% of GDP, compared with an average primary deficit of 1.5% across the rest of the EU.
Although Greece’s fiscal surplus is expected to narrow modestly this year as cuts to personal income tax take effect and pensions rise, the country’s fiscal performance is still expected to be stronger than that of most EU countries.
The International Monetary Fund (IMF) forecasts that the Greek government’s primary surplus will stand at 3.4% of GDP in 2026 and 2.6% in 2027. This comparatively strong fiscal position reflects robust growth in tax revenue and restrained spending, particularly on the wage bill of the public sector and social benefits.
Public tax revenues have risen not only thanks to a favourable economic growth environment, but also as a result of a series of structural reforms that have strengthened the state’s ability to collect taxes. The significant increase in income tax and VAT receipts in recent years is a case in point. Between 2019 and 2025, the combined ratio of VAT and income tax revenues to GDP rose by 3.4 percentage points.
In recent years, the Greek government has introduced a series of reforms aimed at improving tax administration and curbing tax evasion. These included the establishment of the Independent Authority for Public Revenue (IAPR) and the introduction of a range of digitisation measures, which increased transparency and enabled businesses to submit data to the tax authorities in real time.
The myDATA electronic platform (my Digital Accounting and Tax Application) began operating in 2020. It requires businesses to transmit their accounting records and invoice data digitally and directly to the tax administration, thereby reducing opportunities to conceal taxable income.
In addition, linking point-of-sale (POS) terminals to cash registers and tax administration systems has improved VAT collection. Combined with the widespread adoption of electronic payments, the automatic transmission of retail sales data from POS terminals to the tax authorities has strengthened VAT compliance, particularly in sectors at higher risk of tax evasion, such as hospitality, retail and personal services.
Improved tax collection efficiency is reflected in the European Commission’s estimates of VAT compliance gaps in EU member states. Until the end of the 2010s, Greece had one of the largest VAT gaps in the European Union, highlighting the considerable difference between the amount of VAT that should have been collected and the amount the state actually received.
Since then, however, Greece’s VAT compliance gap has narrowed significantly. This suggests that an increasing share of economic activity is now part of the formal tax system.
This structural improvement in tax collection provides public finances with a significant buffer against potential future shocks. Stronger tax compliance broadens the tax base and reduces the dependence of government revenue on cyclical swings in the economy. As a result, fiscal performance is expected to show greater resilience if growth slows or geopolitical turmoil affects trade or tourism.
Moreover, higher and more reliable revenue collection helps Greece cope with periods of rising sovereign bond yields or increased volatility in international capital markets.
Against this backdrop, the gains made in tax administration are not merely a temporary increase in revenue, but a lasting improvement in the country’s ability to absorb external shocks, DBRS concludes.