Greece economic woes deepen as tax receipts nosedive

Athens budget statement shows big fall in tax income and rise in social security payments

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Tax receipts in Greece have fallen steeply. Photograph: Alamy

Greece is struggling to cope with a collapse in corporate tax receipts, according to the latest figures from the Greek finance ministry.

The steep fall in corporation tax income – from €737m (£590m) between January and May 2011 to €448m in the same period this year – is likely to weigh heavily on the new coalition government as it prepares for a European summit later this week.

Without the ability to tax company profits, the government will be forced to step up its demands on households for tax income at a time when most families are already suffering cuts in wages and falling living standards.

The figures will also undermine the message from Greek leaders that the new government is capable of arresting the country's decline and paying the interest on a new tranche of debt funding from Brussels.

Overall, government income declined by €1bn, from last year's €19.9bn to €18.9bn. Receipts from personal income taxes rose slightly, but were unable to offset the collapse in corporate receipts and falls in property taxes and "other direct taxes", which fell to €816m from last year's €1.4bn.

VAT and other indirect tax revenues also fell heavily between the first five months of last year and the first five months of 2012,

Only a massive funding boost from EU funds kept the total state budget revenues from declining after a rise from €673m to €1.5bn.

The German finance minister, Wolfgang Schaüble, who repeated his warning that Greece must live within its means, is unlikely to look kindly at other elements of the Athens budget statement, which shows that agriculture subsidies are up along with social security payments, especially state pension contributions, offsetting cuts in funding for social projects.

Plans to claw back indirect tax arrears appear to be succeeding after payments increased by two thirds to €246m, but arrears payments from corporate and personal taxes declined, showing the government has an uphill struggle to tackle widespread tax evasion and avoidance.