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Greece looses € 13 billion per year from tax evasion

14 December 2011 / 16:12:05  GRReporter
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Anastasia Balezdrova 

Revenue in the amount of €10-13 million or 5-6 per cent of GDP loses the Greek state annually due to tax evasion. Informal economy in the country is the highest among the Member States of the Organization for Economic Cooperation and Development at a rate of 25-28 per cent of GDP.

The shocking data on the amount of tax evasion, which suffocates the state budget and restricts any possibility of development, were presented during a discussion on "Tax evasion and social justice", organized by the Hellenic Foundation for European and Foreign Policy and the Foundation for Economic and Industrial Research.

Professor Diomidis Spinelis, who until recently was Chief Secretary in the Ministry of Finance, (and no one has understood what the personal reasons for his resignation were), presented some interesting facts. He said that corruption in the mechanism for collecting taxes has even a rate. "It is the 4-4-2 system. This means that when violations of tax law are found during an audit, 40 per cent of the amount remains for the irregular taxpayer, 40 per cent goes to the inspecting tax officer and only 20 per cent go to the state."

Diomidis Spinelis stated an impressive fact about how corrupt the system is. "It is well known that when the state must return to the taxpayer particularly high amounts in taxes, 8 per cent of the sum goes straight into the tax official’s pocket." He received an immediate reply from the current head of the service fighting economic crimes Nikolaos Lekas who said ​​that "this percentage has increased to 10 per cent."

According to Diomidis Spinelis, the system has two major problems: inefficiency and mismanagement. He said that while working in the Ministry, he has encountered many cases of restriction of the competences of audit bodies. He gave an example with an order issued for a specific tax audit, which did not allow the authorities to make an audit for other taxes except for those specifically mentioned. Diomidis Spinelis presented data showing that some tax offices in Greece need 20 months to complete a tax audit. To prove how cumbersome the Greek bureaucracy is he presented a paper signed by 32 employees.

The growth of the phenomenon of tax evasion is not accidental. According to Diomidis Spinelis, the development of the electronic system Hephaestus to fight fuel smuggling was interrupted twice by political interference. Although the initial estimate of its cost amounted to € 1 million, the project was awarded 15 million.

"Perhaps the reason for Mr. Spinelis’ leaving the Ministry of Finance is precisely that he opposed the deep interests inside the institution," was the comment of New Democracy deputy Kyriakos Mitsotakis, which resulted in questions and attacks from the audience about who is behind these interests.

In his speech, the head of the service for fighting economic crimes Nikolaos Lekas ​​emphasized the attempts for collecting hidden taxes from the "big fish". "The law for the opening of bank deposits was enacted in 1995 but was applied only in 2010," he said to explain the increased audits and arrests of debtors in recent weeks. The results of the audits show that the Peloponnese town Kranidi is the Greek Liechtenstein, after five employees in the local tax office were found to be serving 178 offshore companies. He expressed the view that the current system of collecting taxes is neither simple and comprehensible, nor applicable and effective.

This was made clear by the survey data, which the teacher at the Economic University of Athens, Matsanganis Manos presented. The data show that the amount of hidden income amounts to 10 per cent of the real one. "The lowest are the percentages of pensioners and employees, because their taxes are based on the income statement. Rich people in Greece are hiding 10 per cent of their income and the corresponding rate is increasing to 24 per cent for just 1 per cent of the very wealthy Greeks," he said.
 
According to the Assistant Professor at the Pandit University Nikos Karavitis, "the errors" in the system are not at all accidental and they are the result of clientelistic relations between politicians and certain social groups. "The system itself makes it easier for some to declare incorrect data and income completely legally and with almost no risk of being caught. This happens where there is no obligation to keep accounting books to be used for determining the actual tax liability. According to the data we have, pensioners and employees are paying plenty of taxes. Rentiers earn on average less than € 500 per month and over one million of them earn from their properties less than € 150 a month. Agricultural activities provide an average income of € 130 per month. In particular, people who profit from such activities are more than 60,000 but according to tax lists, they are only 40 in the country. I do not know how this fact relates with the about 30 swimming pools we see in a typical rural village of three thousand inhabitants." How does this happen?

"I do not mean that Greek farmers are rich. The exaggeration in my example is related to the fact that I do not understand how 900,000 people could live with an average annual income of € 800. While I was examining the case, the first thing that impressed me was that farmers are not obliged to keep accounting books. Taxing them is presumably through a complicated procedure based on dozens of laws, regulations, etc. I think it is a myth that they are under a special tax regime. They themselves are involved in this maze. The audit procedure for them is equally confusing and particularly slow. However, I do not think the problem is the income of farmers themselves, but those who trade with their products.

Tags: EconomySocietyTax evasionCorruptionTax offices
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