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Industrialists: nightmarish economic reality

19 February 2010 / 09:02:12  GRReporter
2560 reads

Victoria Mindova

Greece has a good legal framework and economic instruments to conduct an effective financial policy - the problem is that it does not have the right people to manage that system. This is the conclusion made on the annual tax forum entitled "Last chance for radical tax reform," organized by the Greek-American Chamber of Commerce. All participants in the forum agreed that the current economic crisis gives one last chance for Greece to introduce a modern, socially responsible and fair tax system that will operate in the long term. 

President of the Hellenic Chamber of Commerce and Industry Kostadinos Mihalos defined the current period as “nightmarish economic reality". Mihalos noted the need for a radical restructuring of the tax system in the country so as to encourage investment and to strengthen the international competitiveness of Greek businesses. The President of the Chamber of Commerce expressed his sharp disagreement with the decision of the PASOK socialist government to impose a 40 percent annual income tax on citizens who registered €60 thousand annual revenue. Mihalos said that statesmen are willing to "sacrifice" the middle class of the country, which will have disastrous consequences for the economic life in Greece. "We need to introduce a system that clearly defines the social role of the state and is targeted to the needs of vulnerable groups in society," said in his speech Kostadinos Mihalos. The tax reform is supposed to enable businesses to be competitive on the European market and to allocate tax burdens fairly in accordance with the size of taxpaying businesses. The representative of the Union of Greek Industrialists Koduyani Lydda agreed and said: "The Greek capital market is an essential tool to improve competitiveness and the business climate in the country. Condition for this is the creation of an effective and adequate tax system that will apply in the long term.” 

Economic expert Nikos Christodoulakis, former Minister of Economy during the period 2001 - 2004 said that radical solutions do not always lead to good results. He gave an example with the reform in 2004, when corporation tax was sharply reduced. The tax rate fell from 35% to 25% of annual corporate profits, which has not led to increased investment but a decline in annual tax revenues from €5 billion to €2.3 billion. "Decision of the problem with politics when we lack money is not revenue reductions and increased tax rates. We should optimize the tax-control system to give the best results," Christodoulakis said. The speaker presented data from previous years to explain the depth of the problem: "Revenues from VAT collection dropped from 14 percent of GDP five years ago to 12 percent of GDP right now, regardless of the increase of value added tax with one point in this period. This is due to the widening corrupt practices and criminal inefficiency of control authorities, who are acting right."  The inefficiency of the current control system in taxation was established as a prerequisite for the development of the grey economy. 

Nikos Christodoulakis proposes creating a new system of separate independent committees, which will ensure fairness and efficiency of the tax system. "Changes in the methods and bodies carrying out tax audits are essential." The Commission, which will carry out inspections, will not be empowered to apply penalties on violators. The criminal charges will be imposed by an independent commission in order to avoid the existing now corruption. The supervisory authorities must act independently and in full transparency, in order to make sure of the effectiveness of their activities. Easing of administrative activities will be easier for citizens and will help the control of the activity of small and medium businesses. In conclusion, Christodoulakis stressed that Greece does not have to resort to extreme measures, which will cause dramatic public events, but to put into effect the positive sides of already existing laws. "Economic history is full of remnants from the application of the loud and radical reforms in fiscal and other economic systems. I would like to propose to resort to one logical and adequate tax reform, according to the needs of the modern age, which will fix the issues of taxation," concluded Nikos Christodoulakis.

Tags: Taxation policy VAT Greece Economy tax
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