A report claims that one-third of the country's deficit can be traced to tax evasion and corruption.
By Andy Dabilis for Southeast European Times in Athens -- 26/07/12
Prime Minister Antonis Samaras ran for office on the promise of lower taxes and stronger collection efforts for tax dodgers. [Reuters]
Leaving their country to struggle through recession and austerity measures, tax cheats have robbed Greece of some 11.2 billion euros, according to Greek and American researchers.
Rather than looking at tax records to identify the trends, economists Nikolaos Artavanis, Adair Morse and Margarita Tsoutsoura used bank records to analyse tax evasion's role in the Greek debt crisis.
Using the same method that banks use to determine one's "true income" before approving loans and credit cards is more accurate and reliable than looking at tax records, the June 19th report concluded.
Comparing bank data with government data, the authors found that the true income of the average Greek person is about 1.92 times larger than generally reported.
The economists found that in 2009 tax evaders failed to report 28 billion euros which, at a tax rate of 40%, accounted for nearly a third of the country's deficit.
They found that the top tax-evading occupations -- doctors, lawyers and engineers -- were heavily represented in parliament, which subsequently rejected a bill that would have targeted them for tax evasion.
The EU-IMF-ECB Troika is pressuring the new coalition government -- headed by Prime Minister Antonis Samaras, the PASOK Socialists and Democratic Left -- to impose reforms and cut another 12 billion euros from the budget in order to qualify for two bailout loans totalling 265.3 billion euros. But, thus far, they have failed to crack down on tax evasion.
Despite their findings, Artavanis told SETimes that he is not optimistic that the authorities will begin using bank data to track tax evasion.
"People would immediately change their banking practices," he said, adding that it would probably weaken the Greek banking system even more than it already is.
George Tzogopoulos, a research fellow at the Hellenic Foundation for European and Foreign Policy in Athens, said that dealing with tax evasion is a matter of political will. "Greece lacks the sufficient number of controls," he said.
Earlier this year, authorities charged 200 people with tax evasion, but failed to obtain a single high-level prosecution. This month, a group of seven retired and active tax officers, four of whom were high-ranking administrators, were sentenced to 70 years in prison for embezzling 28m euros; however, they were released for a pending appeal
Economists are on the right track by using the bank data instead of tax records, Alex Afouxenidis, Athens-based National Centre of Social Research analyst, said.
"We are not talking about tax evasion, per se, but about a sort of tax immunity provided by the current tax regulations -- the political system itself," he told SETimes.
"It is not only that some individuals receive bribes, but more importantly, a lot of them do not hand out receipts for their services," Afouxenidis said. This, he explained, creates a common case of hidden income between numbers of Greek professionals.
With so much at stake, Deputy Finance Minister George Mavraganis called on the heads of the 30 major tax and customs offices in the country, which collect 80% of tax revenues, to "give their lives to save the homeland." In Greece, however, it appears that one place they haven't looked and most likely will not look is at bank records.