Greek authorities decide to confiscate bank accounts of debtors who owe the government.
By Andy Dabilis for Southeast European Times in Athens -- 17/12/13
Finance Minister Yannis Stournaras announced Greece's new measures to seize debtors' bank accounts. [AFP]
Under pressure from institutional lenders, the Greek government ordered garnishing of debtors' wages and pensions from bank accounts and is considering jailing convicted tax cheats instead of solely levying financial penalties.
Finance Minister Yannis Stournaras approved the new rules that will give banks 10 days to freeze the accounts of clients who owe the government money after receiving a notice from authorities.
Under the new rules, tax officials will also have the ability to check the progress of their requests via an online system that will link them to the banks. The government measures, however, cannot reach those hiding money in foreign accounts.
Analysts said asset confiscation is part of the reforms the government has undertaken per the IMF-EC-ECB Troika's criticism of Greece's 2014 budget. The Troika said there is a budget gap of up to 2.9 billion euros and it will have to be closed with new revenues or money obtained from additional austerity measures.
Because parliament approved the budget without the institutional lenders reviewing it, the Troika delayed the release of a 1 billion-euro-instalment until at least next month.
Despite Greece's well-publicised crackdowns on tax evaders estimated at owing more than $70 billion, the effort has failed to bring a single major prosecution. Experts said much of the sum is uncollectable because the debts are too old -- closing a case can take up to a decade -- or owing companies have gone out of business during the economic crisis.
Even in much publicised cases such as that of fashion designer Lakis Gavalas -- who owes 18 million euros but was given suspended sentences despite being convicted four times -- there has been leniency.
"Many people have avoided paying taxes for many years. It is high time that something is done in order to tackle the problem of rich people avoiding paying their taxes," Antonis Klapsis, head of research for the Konstandinos Karamanlis Institute of Democracy in Athens, told SETimes.
Klapsis said the threat of seizing assets or imprisonment may well make many pay what they should have already paid to the government.
"It will also send the message that from now on no one will get away if they do not respect the law," he said.
Recent financial crimes investigations which reviewed a list of 2,062 Greeks with 1.5 billion euros in the Geneva branch of the HSBC bank found many in the first 150 audits were dodging taxes and assessed fines of 50 million euros.
The new rules include debt cases of more than 300 euros, but will not affect wages and pensions less than 1,000 euros.
Greek police said they had made more than 2,200 arrests for debts owed to the government and other tax offences, amounting to more than 9 million euros.
The rules also allow Greece's tax office to have access to the available balance of a debtor's account. The repossession papers will then be published in electronic form while the banks will bind the balance of the account and ascribe it to the government account.
Alex Sakellariou, a sociologist at Panteion University in Athens, said while getting tough on tax cheats might win points, the government's strategy may not work as well as planned.
"I am not convinced that jail is always an effective tactic. Imprisonment should be combined with a stable legal system and a stable tax system, both lacking in the Greek society," Sakellariou told SETimes.
Taking debtors' assets is risky, he said, because it is likely to be unfair.
"Some tax evaders should pay, either seizing their assets or put them in prison, but many people came in that condition, mainly of the middle class, due to the government's [austerity] policy."
What can the Greek authorities do to ensure debtors pay what they owe the government and prevent tax evasion? Share your opinion in the comments space.