Quelle Surprise! Greece is REALLY REALLY Bad at Collecting Taxes!

Big Bad Bank, via Richard Smith, pointed out a post last fall that didn’t seem to get the traction it deserved (when market sentiment about Greece was peculiarly less pessimistic than now) that Greek tax administration is world class wretched. This matters because even if you operate under the fantasy that austerity works, you still have to be able to cut expenditures and raise taxes. But the logic of “raising taxes” is that if you increase tax rates, you’ll increase tax receipts. If you are already really terrible at collecting taxes, the odds are high that rate increase will not translate fully into higher tax revenues. And even if Greece were to decide to improve its tax apparatus, the machinery is in such wretched shape that it would take years of investment (and changes in laws) to make a dent.

The worst is that when your read this description (which I am excerpting at length, the details are intriguing and damning), although corruption plays a significant role, terrible institutional and systems design is an even bigger culprit.

From LOL Greece:

….I am referring to an explosive presentation by one Dr Vassilis Manessiotis of the Bank of Greec…Manessiotis’ presentation was a revelation even for a native Greek cynic such as myself…

Dr Manessiotis explained that, as with all developing nations (yup!), tax administration in Greece is tax policy…

Dr. Manessiotis explained that Greece’s tax evasion and avoidance is mostly of a low level of sophistication, not the financial wizardry that one might find perpetrated in the City of London. It starts with simple failures to issue receipts and maintain accounts…Overall, Greek officials believe that ca. 30-35% of all potential tax revenue is lost to avoidance and evasion…

Greece has 286 tax offices (listed here), an enormous per capita figure by OECD standards, created in the past two decades for clientelist reason….In the 1980s, 1990s and after 2007, large numbers of civil servants were moved into tax offices from other parts of the civil service without the necessary skills or training…you see, the geographical dispersion of tax offices was a great parking system for civil servants wanting to work near their families.

The actual set-up of tax administration is an invitation to corruption – not only do tax officers have ‘unbelievable’ levels of discretion, they can only be disciplined by a committee of their own colleagues and the Greek Finance Minister must personally approve any transfer of a tax officer. The problem of corruption is acknowledged by the Inspector General of Public Administration and has deteriorated substantially in the past 10 years. It does not help that in Greece the quality of tax services by civil servants is extremely low; citizens are generally expected to know the law in minute detail and there is little to no support forthcoming when they inevitably do not. Thus they are entirely at the tax officer’s mercy in most cases.

Greece has no tax dispute resolution mechanism involving mediation – every contested case goes to the Tax Courts, which are currently facing a backlog of 150,000 cases worth a total of EUR30bn (ZOMFG). The average case takes 7-10 years to resolve. Taxpayers are technically required to pay 25% of the tax due in order to appeal in the first place, but the courts have the option of waiving this sum, which they exercise about 90% of the time (and, one is tempted to think, not without earning a bit of commission).

Finally, Greece has a long history of tax amnesties – 10 in the past 32 years, with the most recent taking place this year. A total of EUR17.5bn was written off in this manner between 2000-2008. Tax amnesties are by now built into the expectations of Greek taxpayers and their tax advisers (mostly notaries and accountants), encouraging a cavalier attitude to the law, which at any rate changes every month or so.

Greek Governments instroduced 104 major pieces of tax legislation between 1986-1995 alone plus a number of ‘emergency’ levies on businesses. As a result, the tax system is teeming with exceptions and ad-hoc provisions. The obvious implication is that tax information systems are rudimentary and non-integrated and in fact certain pieces of legislation have their own dedicated information systems that are impossible to reconcile with any other tax information. Amazingly, where tax systems have been computerised, the effect has been to simply digitise what was once a manual process – with no saving in time or effort at all and certainly no additional functionality. In fact the amount of paperwork has often increased as a result. Amazingly, tax officers cannot use what information systems they do have to consider a particular taxpayer’s tax history (no such functionality exists in the system), nor can they check their historical record of violations and/or errors. In many cases, taxpayers are required to submit their latest tax return themselves in order to fill in the gaps…

Overall, the cost of collecting taxes in Greece is 1.6% of the amount levied, twice what it is in Canada. In personal income tax, this ratio rises to 2.4%, which is 4 times the US level. This does not include the costs borne by citizens, who must collect all receipts on pain of losing half of their tax allowance..

One way of seeing all of this is to say that Greece has enormous potential that is being squandered by administrative failure – the Government/IMF line. If we could fix this, Greece’s public finances would be sustainable. Another way of seeing it, however, is that we simply do not have the time to overcome all of this massive failure while in the throes of a debt-fuelled death spiral. Greece has a poor record of institutional reform, which at any rate is a very tricky business.

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  1. hapa

    time enough for austerity, but not enough to bolt-on revenue collections, or restructure obligations to allow administrative infrastructure time to grow.

  2. Neil Wilson

    If ever a case cried out for a land value tax, this is it. Sweep away the old taxation that doesn’t work and simply tax the land or confiscate it.

    1. RichardB

      An excellent suggestion. Or perhaps this is an opportunity to give the automated payment transaction tax a try.

        1. Richard Burr

          Even better! And just think of the surge in GDP when those 10’s of thousands of people who make a living off the current tax system finally have to do something productive.

    2. Psychoanalystus

      Neil Wilson,

      And you must be the guy running Goldman Sachs’ feudalization department…

  3. attempter

    Greece doesn’t need to collect taxes. Short of taxing interest rents and “property” in land and other natural or infrastructure assets (or an extremely high income tax rate for high incomes only), there’s no taxation which is anything but a drain on those who actually work.

    One of the few things we non-rich (we citizens) have going for us is the relatively low tax rates inflicted upon us, and the anti-tax political climate which renders it possible that we can resist austerian tax increases (which will all be regressive) and perhaps get existing taxes upon us repealed. (That’s one place at least where anti-corporatists and tea partiers ought to be able to agree.)

    By now all taxation on the non-rich is regressive. Government is unwilling to spend on anything but corporate welfare, aggressive war, and the police state. Three things which are useless and destructive toward the people. Government will never undertake new public interest spending, and any such spending which still does exist does so only through inertia and political duress. It has nothing to do with whether or not “sufficient” tax revenue is coming in. If government can gut SS and Medicare and privatize everything else, it will. The level of taxation has nothing whatsoever to do with that. It’s a purely political struggle.

    So there’s a clear and concise goal for citizen action:

    No Taxes on the Non-Rich.

    1. rd

      The Greek wealthy have taken a very inefficient approach to tax evasion.

      The American model is much better. Subject the unwashed masses to paycheck withholding with many of the taxes (FICA) noy subject to any tax deductions. Obviously, you set up the system so that the migrant farmworkers that provide you with inexpensive fruits and vegetables are not subject to tax withholding.

      Meanwhile, you bribe the politicians to write tax laws so that your marginal tax rates are much lower than the unwashed masses’ marginal tax rates. Since bribery is a crime in most places, you need to write additional laws and get judges appointed who will provide legal avenues for the bribery.

      Then, if you find that the country still has unbalanced accounts, your bribed politicians will ensure that the benefits that the unwashed masses pay taxes for will be slashed so that your benefits that you do not cover with your taxes can remain in place.

  4. Kiste

    There is something wrong with the simplicistic tale that some people here (and a lot of people in Greece) seem to adhere to:
    “Austerity does not work and Greece is raped by the banks / the EU”.

    I agree that austerity is extremely counter-productive when dealing with a revenue shortfall due to an economic downturn. But Greece is different. The oversized, corrupt, ineffective and wasteful public sector is the CAUSE of the countries problems. It’s not sustainable, even if the Greeks managed to actually collect taxes. Addressing the root of the problem would be, in effect, an austerity program.

    Even if all public sector debt was forgiven, this would not address the cause of why Greece ran up so much debt in the first place:
    1) a oversized public sector they cannot afford and that is corrupt, ineffective and inefficient
    2) a social security system they cannot afford and that is utterly, completely unsustainable
    3) an unsustainable level of military spending that is higher as percentage of GDP than what the USA spends
    4) The whole country is essentially a corrupt family business that has been run by two family clans (Papandreou, Karamanlis) for the past couple of decades.
    5) Corrution in every single wake of life, from the bureaucracy to the court system, everything requires bribes.

    You might say: Greece = Turkey + a few decades of cheap EU money.

    The Greek problem isn’t debt. Debt is merely the symptom.

    1. Foppe

      So what? On the other side there is this bizarre tale going around that, if people behave in some way they don’t approve of, they have a right to chastise and reeducate them. I am sure you are familiar with the “White man’s burden”.
      The Greek people (as any people with their own nationstate) are still sovereign unto themselves, and as such, others do not have the right to force them to arrange their political or institutional system differently simply because a bunch of bankers and institutional investors/pension funds want to have access to more places where they can generate “profit”.

      1. Kiste

        “So what?” Are you serious?

        They can be as sovereign as they want to be, this still does not address the basic problem that the country is utterly dysfunctional. What would you propose? That Europe provides permanent welfare to Greece because telling them to fix their problems would be some racist “White Man’s Burden” proposition?

        The issue here is not whether there is outside interference or not. It’s simply not relevant. None of this has anything to do with the reason why Greece is suffering. Again, what would your solution be?

        I see only two alternatives:
        1) Greece gets its act together and becomes something resembling a first world country.
        2) Greece returns to its natural state of being a poor country, roughly on par for Turkey.

        If you see a different scenario, please, enlighten me.

        1. Foppe

          As it stands, the only people willing to modernize Greece are a bunch of kleptocrats. So long as they are there, nothing good will happen to Greece by way of structural improvement. Especially not when they are being egged on by the ‘troika’; all they want is privatization and welfare state destruction, with institutional reform — rather than destruction — being something that might or might not happen in the future. They never cared whether Greece was a functioning country, so long as it functioned well enough by their metrics — investment opportunities through lending.
          As such, your option two sounds to me the kindest one (especially since that ‘poverty’ is measured by ignoring most of the informal economy anyway, so it’s likely to be somewhat overstated).

        2. MyLessThanPrimeBeef

          Often the darkness gets darker before there is true light.

          Sometimes, it’s just someone lighting a cigarette a couple of hours before midnight.

      2. craazyman


        the poor greeks is sovereign unto the wealthy greeks.

        and the wealthy greeks is sovereing unto the banks

        and the banks is sovereign unto the pyramid

        and the pyramid is sovereign unto the snake

        and the snake is soveriegn unto the grass

        and the grass is sovereignn unto the fruit

        and the fruit is sovereing unto the poor

        and theen it starts all over again

        and the alpha is sovereign unto the omega

        and all youze gyze is in de middle

        sometimes I understand eastern philosophy, but only briefly

    2. financial matters

      I think it’s clear that Greece is going to suffer regardless and putting it’s own house in order is not going to be any panacea. But I also think the ECB is just out for short term gains for itself and member banks and not looking at viable long term remedies..

      But as attempter points out above it gives Greece the freedom to deal with its revenue problems in more sustainable and innovative, productive ways


      “”The simple fact of the matter is that the lenders who made this overleverage possible are just as responsible for this – if not more so – as Greece is. Lending money you know can’t be paid back should result in you losing your investment. That it doesn’t reliably do so isn’t an indictment of the borrower, it’s an indictment of the lender.””


      “”Putting off the day of reckoning makes the situation politically unpredictable and, therefore, considerably worse. This would increase the likelihood of other defaults and of the euro zone coming undone. Acting now maximizes the recovery value for Greece’s creditors and allows the E.U. time to develop the institutions needed to support a single currency””.

      1. JTFaraday

        “Lending money you know can’t be paid back should result in you losing your investment.”

        Agreed. Interesting that dysfunctional government bureaucracy is dysfunctional and citizens should pay for it, but dysfunctional banking is somehow not dysfunctional and investors should not pay for it.

        1. DownSouth

          Yep. Anybody with an average intellect, or maybe even a less than average intellect, can spot the hypocrisy from a mile away.

          But that doesn’t prevent the apologists for the bankers from making their pitch.

  5. Rogerio Normand

    Coming from a country that still fight against tax evasion, I may have a suggestion. Brazil has used a kind of tax directly on the bank account withdraws. This is simple to implement as there are few banks compared to total population and you could use software to implement/control it. Every time you withdraw money from your bank account, you pay the tax. It is for everyone (companies and people) and, of course, the individual tax amount will be proportional to your expenses (similar to your economic health and contribution capacity).

    The tax rate could be adjusted to the goals. If small, like 0.01%, it can provide information about differences between IRS declaration and “reality”. Then you can check for tax evasion (not sure if it would be the best).

    If higher (no suggestions about what would the the right tax rate) it could substitute other taxes, like personal or company income taxes. It could be considered inflationary by someone (as you can’t compensate with paid taxes, like VAT works in Europe), but at the same time, in a depressed economy, it would be hard to increase prices (also due to the substitution of before mentioned taxes). It is also possible to check informed IRS reports versus reality.

    The extra benefit of the later is to reduce public employees as they won’t be necessary in the same number as you have only to pay attention to banking movement and this should be mostly done by computers.

    There is a risk that companies and wealth people would move their bank accounts to other EU countries, but this could be blocked by a EU law obliging banks to inform (or even to “charge”) Greek companies/people with bank account abroad. It should not be hard to approve as EU is providing a lot of cash to help Greece and banks.

    Beyond EU zone, it is hard to imagine the benefits would be greater than the currency exchange costs/rate risks and other associated costs.

    As you are not taxing wealth but the use of money, there would little reasons to take out “your” money from Greece at the first moment, at least the “working capital” should stay there.

    To “protect” regular people savings, it could be possible to have a tax exemption to companies/people investing in Government bonds, what would help to support Greece.

    Of course many adjustments should be required and I am not trying to solve all problems, but it could be a different approach from a country with experience with tax evasion fight.

    What so you think?

  6. Norman

    Am I being to simplistic in my take, or isn’t the present situation in the U.S.A. similar in nature to what is taking place in Greece today?

    1. Art Eclectic

      That’s pretty much my take on it. When you boil it all down, nobody wants to pay taxes. Everybody thinks they are special and shouldn’t bear the burden of the commons. The rich think they are the “productive” ones and should be allowed to keep more of their spoils because they make the world go round. The middle class thinks they are so put upon and it’s the middle class who makes the world go round, so they deserve mortgage interest deductions and child credits. The poor think they do the dirty work of the world and shouldn’t have to pay into the commons.

      Everybody thinks someone else should pay. It’s no surprise that revenue is down.

      Greece should default and then learn to live within their means once nobody will loan them anymore money.

      1. DownSouth

        Art Eclectic said: “Greece should default and then learn to live within their means once nobody will loan them anymore money.”

        Simplicity and elegance.

        Everybody involved takes their knocks. Everybody licks their wounds. And life goes on.

      2. Externality

        And the upper classes (and their ‘experts’) think they are the only ‘serious,’ ‘mature’ people capable of setting priorities. Even in a ‘democracy,’ the elites make the decisions and force, or attempt to force, the middle and lower classes to bear the costs.

        Unpopular wars, urged by ‘serious’ people, lead to unpopular budget cuts, urged by ‘serious’ people. Stopping (or at least avoiding more) wars would be UnSerious. The Obama administration simultaneously started another war and asked Congress to cut heating assistance for the poor claiming the US is broke. When the war with Libya ends, Americans will be told that because ‘their government’ decided to attack Libya, they will be forced to pay higher taxes and deeper austerity. Anything else would UnSerious.

    2. readerOfTeaLeaves

      It’s only the past week or 10 days that I’ve seen a few blog posts which basically say, “Whoooa, we thought Greece was a liquidity problem, but now we think it’s an insolvency problem.”
      That’s a very recent shift.

      NC was examining this hard truth months ago, but it seems the rest of the blogosphere is starting to catch on and wake up.

      In terms of interesting new little conversations emerging, I thought this post at TheWashingtonNote, by Steve Clemons, pondering how far we are from a meltdown like Greece was eyebrow raising. I’d quibble with Clemon’s point that ‘no one saw the [mortgage-housing] bubble’, because anyone who could look at their own neighborhoods or read a newspaper should have seen this coming. What someone like myself did not understand was the b.s. securitization structures, and the insurance fraud (CDS) level of bogus money that were built atop the massive mortgage fraud of the housing market. Nor did I have a clue about the brazen fraudclosure procedures and the depth of the perversion of the courts and legal system. In that sense, it’s pretty hard to damn Greece when we have in the US a system that really almost looks to have been custom designed by the Mafia in order to commit massive fraud, then have the government sanction that fraud.

      The linked post is not a typical topic for that foreign policy blog, so the fact that it was highlighted there was intriguing. Clemons also references INET, which seems to be doing yeoman’s work in thinking about new economic structures.

      Call me a cynic, but I am unable to grasp in what way leveraged ‘value’ derived from CDS bets is a long-term, sustainable economic model. Certainly the role of CDOs in creating the *illusion* of wealth, and then the added layer of CDS’s in betting on that illusory wealth appears to be a system of banks jumping the shark.

      If we are seeing a banking system engaging in *illusory* wealth creation (CDOs), followed by even greater wealth destruction (CDS’s), then Greece seems to be the canary in the coal mine.
      Because this CDO, CDS pattern is systemic and global — and unregulated. The FT was reporting late in the week that Merkel, et al, were aflutter because no one seems to be able to figure out what the real CDS exposure is… sound familiar….?

      Layer that onto what appears to be a dysfunctional administrative process in Greece and what you appear to have is more evidence for really appalling judgment on the part of the banks — acting as loan sharks in order to impoverish nation states.

      It seems reasonable that when even Steve Clemons at his foreign policy blog is mentioning INET and talking about how Americans have yet to wake up to the realities that Greece is revealing, then you know it’s not just a few of us commenters here at NC who are feeling a bit queasy about all the craziness we observe on the global stage.

      1. eric

        Only in the last few days? Hasn’t everyone who wasn’t blind always known that Greece and Ireland (and possibly Spain–I don’t know enough to know) were functionally insolvent? That their debts could never be repaid without destroying the country? IReland has chosen to destroy itself; I’m hoping Greece will have a “good” default… We’ll see.

  7. /L

    This is again typical neo-liberal approach, always avoiding the big picture and dive in to the details and let the micro approach explain and pretend it’s the big picture. It’s very convenient, diving in to the micro approach you can pick and choose and confirm your prejudices.

    Everything is probably more or less correct but does it really give an adequate picture of what really have been going on?

    The real problem here is economic science who seems to only have vague understanding of monetary issues. They are no longer of any help to any country to improve their economic conditions for their overall people.

    As the Chancellor of Austria Bruno Kreisky once said on the question why Austria had been so economic successful, “we did have a very successful export, we exported our economists”. Those who now plague the world from places like vonmises.org and such places.

  8. /L

    World bank data:
    Central government debt, total (% of GDP)
    1995 109
    1996 112
    1997 109
    1998 107
    1999 109
    2000 124
    2001 127
    the debt is converted to Euro, a foreign currency that Greece is not sovereign in.
    2002 128
    2003 123
    2004 127
    2005 133
    2006 127
    2007 123
    2008 123
    2009 138

    The Greece “menace” wouldn’t have happen as I t is now if they had been sovereign in their own currency, the size of the debt is then not an issue only debt denominated in foreign currency. The real currency risk would have chilled of both Greek borrowers and foreign lenders (maybe).

    It’s the Greeks business to organize their society, no one else’s. No one have became prosperous with the help of IMF & WB lunatic neoliberal recipes, those who have break loose of being a poverty countries have done it their way with their custom made recipe, usually in contradiction to IMF & WM recipe.

    1. Anonymous Jones

      “It’s the Greeks business to organize their society, no one else’s.”

      I’m sorry, but no.

      I don’t want to attack you merely for a careless phrasing, but this statement comes off like the undeveloped thoughts of the naive religion of libertarianism. Look, it’s not that I don’t get the attraction to the thoughts of simpletons who try to sate the mind’s craving to make sense out of the universe as if it were simple. The problem is…well, the problem is, it’s not…and the emperor ain’t wearing any clothes either, no matter how many people tell you it’s the finest thread in the world.

      Just as I must live in the community of others, no matter how small (HOA) or large (USA) you want to define that community, Greece must live in the community of those outside its borders.

      Listen, I generally agree that the Greek people should exercise sovereignty and that they should have the highest amount of control possible, and without question, I think the power of Greece’s creditors should be circumscribed greatly, but seriously, actions have consequences. The Greeks cannot expect to organize their society any way they want and expect those outside its borders to accept any consequences that these choices burden them with. That’s not how organizations of humans work. You cannot expect that others will merely accept the consequences of your decisions because they “should” or because they have no other alternative. Trust me, they don’t care what they “should” do and there is always another alternative.

      No man is an island unto himself. This is fantasy, and self-destructive fantasy at that.

      1. /L

        Greece is not a one island it’s between 1200 and 6000 depending on definition and has a population of about 12 million.

        It’s not like Greece are threatening the world with nuclear holocaust, it’s just an inefficient tax collecting system. So maybe “we” should bomb them into submission, get your tax collecting system in order or else. You have upset the global loan sharks and moneylenders by letting the loan you exorbitant amounts of money created by fiat, “we” the international society does always protect the global loan sharks and moneylenders, of course the state of Greece tax system and so on was open information to anyone who wanted to know but our loan sharks and moneylenders are like small children, they must be protected they can’t be expected to act as sane grown up people.

    2. Because

      The problem is you don’t want Greek to deal with Greek problems.

      The IMF is doing exactly what you want to happen. Force the international market to force Greek into servitude.

      Your just popping off with no real sense of what your saying.

  9. /L

    Well there is probably plenty to accuse the Greek of and not least their establishment.

    Since the fall of Breton Woods EUrope have engaged in different schemes to fixate the currencies. All of them failed with repeated currency crises. All failures were blamed on individual countries or preferably labor in those countries that did have to high wage. Never was the idea of fixed currency schemes in itself in question, e.g. to let the market decide what different currencies was worth in relation to each other. Those who have most to gain were probably the net-export zombies.

    So after decades of repeated failures and currency crises that caused misery to many people they decided that it was definitely no wrong what so ever with these schemes and now it should be irrevocably cast in iron and no one should be able to bail out from the scheme, the birth of the ultimate fixed currency scheme the Euro.

    While the evil Greek labor made them self “uncompetitive” on the global market Greek export in inflation adjusted dollars did grow 40% from 2002 to peak year 2008. And well more than twice the German productivity growth (97-07) and wage increases below productivity growth. How can export grow 40% when the workers have made them totally uncompetitive?

    The Greek export growth has the same pattern that many other countries; it takes off in a steep upward curve in the late 80’s and beginning of the 90s.

    1987 – 2008 Export growth
    Arg entina 267%.
    Germany 284%
    Greece 197%
    Sweden 208%

    A significantly change from the previous decades, including the post war record decades. The growth is spiking upwards in a even way over the period, what is causing problem in current account in some countries is import and other factors in the current account.

    Was it the exporters suddenly became much more competitive and thrifty or was it global capital deregulation’s that made it possible to go in foreign debt and trade deregulation’s that made increasingly difficult for individual countries to counteract a growing trade/current account deficit? And one major part was probably USA rapid growing trade deficit that they can finance in their own currency that they can create at will.

    1. Because

      Because market economy is a feature of the international. Letting some foreigner decide your fate is not rewarding.

  10. Patrick

    There’s a number of nations that have poor tax administration. One of the worst is Italy. But don’t expect any concerted effort to collect what’s due. In the main those debtors comprise the business and social elite and nobody’s going to go after them.

    In the days of old a King’s authority rested on his ability to collect his taxes. A state that cannot collect its taxes is not a state. It’s just a geographical entity.

  11. lolgreece

    Thanks for citing! It’s worth looking into Manessiotis’ writing in more detail, as he’s seen it all – you can find plenty of his stuff on Google Scholar, even.

    I’m waiting for permission to publish a similar post on the Greek regulatory apparatus. I’ve seen the author’s draft but he’s not yet published so it’s tricky.

  12. Paul Tioxon

    Tax collection efficiency in the US is 80% at best!! And that is after the net affect of just not demanding taxes via loopholes, political subsidies, and oil depletion allowances. Then there are the special job training grants and loans, incentives for opening up a job producing enterprise in special economic development zones, real estate abatements for real estate development to freeze real estate taxes for 10 years to spur investment, and on and on and on.

    Tax amnesties in PA and NJ recently raised $729M in 2009 for NJ and $261M in 2010 for PA and CA collect $4.3BB in 2005!! NY state apparently runs these with some regularity, 7 tax amnesties from 1985-2010. Overall, a dozen or more states have run these in the last few years and the city of Philadelphia collected $60M in 2010, which is $15M more than the entire haul for the state of NY that year for a tax amnesty.



    Just how much government is beating the crap out of free enterprise is contradicted by the amount of money that comes pouring in when these offers are made to the public on the state and local levels.

  13. Viator

    The Big Fat Greek Gravy Train: A special investigation into the EU-funded culture of greed, tax evasion and scandalous waste

    “The (Greek) overground rail network is as big a racket as the EU-funded underground. While its annual income is only £80 million from ticket sales, the wage bill is more than £500m a year — prompting one Greek politician to famously remark that it would be cheaper to put all the commuters into private taxis.”


  14. The lives of others

    After the BP oil spill, a lot of small businesses in Louisiana could not produce income tax filings or other receipts to be compensated. On NPR it was stated that the system there operated on “a cash economy”.
    The same holds true for Greece: cash, no receipts, no taxes. Only the civil servants on public salaries can be taxed at source.
    Almost everybody else gets away with it. The austerity measures will succeed in collecting extra taxes from the very same people who always paid their taxes at the source.
    The new austerity measures introdycedca new class of taxation for incomes between 8-12K euro at 10%.
    For those who have not inherited wealth and are crooks, the situation is much more complicated than the numbers you see.
    The poor Greeks suffer from high obesity rates, lung and heart problems and inadequate health care. Some if the reasons are similar to what you see here: unhealthy food is cheaper, smoking and secondary smoke was extreme until recently, and doctors on public salaries would not do a proper job without bribes.
    Now some of the bribes are legitimized and are called consultancy fees. First you see the surgeon in a private office and pay the fee ( you pay more if you want a receipt (in effect the patient pays the doctor’s tax) and then you have the operation using the national health insurance.
    Anyway, the point is that beating the wrong horse does not help.
    Whether Greece defaults or is bailed out will not necessarily lead to reform, for similar obstacles that prevent the US from cutting tax subsidies for the multinationals here.
    (please forgive typos, cannot scroll to see entry in iPad )

  15. Cedric Regula

    File: My Cousin The Tax Collector

    Well, this is quite the Dilemma. Paradoxical too.

    In my MMT studies I learned that you only need to tax when there is inflation.

    Without taxes, Greece must be growing like crazy. Shouldn’t matter whether you price your export olives in euros or drachmas. They just need to be competitive, after currency exchange, with Italian olives.

    A Sovereign Nation can certainly price their own olives, you would think?

    And if they decide they want to price olives in drachma instead of euro for some reason, Goldman Sachs would be willing to help with currency exchange too, I’m sure.

    I can only conclude that there is no problem with Greece and this is all media hype.

    1. MyLessThanPrimeBeef

      Goldman is currently busy arranging a ‘news’ swap whereby Greece gets all the bad news and Goldman gets all the good news.

      Goldman promises to pay back the good news in the future while at the same time, has purchased default swap with AIG with the intention of an enventual bailout where the victimized taxpayers of the world pay for the good news by taking possession of the bad news…or something like. It’s quite complicated really.

      Just another day in the office.

      1. Cedric Regula

        Yup. First the good news – Greece Defaults. Next the news correction – Greece needs to borrow Economic Development Funds to develop an economy and tax collection system. Next – The IMF and everyone else, except Icelandic Investors, says no.

        The bad news will be Chapter 13 bankruptcy for Greece. They will close the place and enforce a citizen “lockout”. Greek nationals will migrate to Iceland and try and get a job fishing there. Forget olives.

        The Mark-To-Model value of Greece, in euros, will be split amongst the “screwed” banks and carried as Tier 2 capital on the books. Greece will no longer have any currency at all! The banks will make loans against this capital, or speculate in stocks and commodities, depending on their whim.

        The Chapter 13 Model will be adopted for Ireland, Portugal and Spain,and all their citizens will live on boats in the North Sea, but not without plenty of good news first!

  16. Tortoise

    Informative article, Yves. If I may make some corrections. You write: “Greece has no tax dispute resolution mechanism involving mediation – every contested case goes to the Tax Courts, which are currently facing a backlog of 150,000 cases worth a total of EUR30bn (ZOMFG).” Not quite. There no tax courts but there is plenty of negotiation — and I do not imply anything necessarily illegal or dishonest on the part of the tax man.
    Part of the problem is that there are no tax courts in the sense we have them in the States. The courts are inundated with tax cases that get no priority. By the time a case comes to court, the situation may have changed, like a business may has gone bankrupt or an individual may have died or gotten rid of property. Thus, at the end, there may be nothing to collect. Not to speak of the fact that the state is so badly represented that it loses most cases. It is interesting that the government passed a law recently asking the courts to expedite tax cases and the supreme court found the law unconstitutional!
    On this basis, the tax officials are willing to negotiate. For example, Yannis gets a note to pay 10 thousand euros inheritance tax. But if he pays immediately, he can get a little break (10% reduction, or something like that) so, please please please pay now. If Yannis is brazen, he can claim that the estimate of the tax is wrong, for any reason you can imagine, and threaten to take the case to the court; however, if the tax official (and we will consider the case that this official is totally honest and perfectly incorruptible) is willing to accept that the tax estimate should be 7 thousand, then he would pay immediately and here is the checkbook! The tax man has no choice and accepts the deal. So Yannis pays 6,300 and that’s the end of the case.

  17. Psychoanalystus

    Greece is and has been a nice place for its people, with civilized pensions and vacations, and respect for workers’ rights. But the neo-liberal kleptocrats that have now taken over the world desperately want to utterly destroy places like Greece and erase all collective memory of them.

    Greece’s tax system is fine for a nation that does not bomb other nations, does not go around running secret torture prisons across the world.

    I am tired of uninformed morons saying Greece is corrupt because doctors, whose average salary is 2000 euros per month, accept a 100 euro gift for performing major surgery, for which the patients pay nothing under the Greek system. If that is corruption, then what is the American medical system, at $7,000 for an MRI, $500,000 for heart surgery, and $1,000,000 for cancer treatment, with 30 percent deductibles the patient has to sell his house in to cover. That is not “corruption”?

    I have only one thing to tell these western imperialist criminals, whether they come from Germany, France, the US, the UK, the IMF, World Bank, or wherever: You are picking on the wrong nation. You will lose. The Greeks will win. They will be the spark that lights up the global resistance against your neo-liberal plan. You will be rounded up like that Dominique Strauss-Kahn IMF criminal was for his crime, you will be tried, and you will either be thrown in prison for 35 years, like Tunisia’s Ben Ali and his wife were, or you will be executed like Ceausescu was and Mubarak is likely to be.

  18. who is Goebbel?

    If it was true! Lies all the time.
    To go to court you have to pay the 50% PLUS the 50% of the penalties which are 50% of the difference, take the time to sum it. When you know that Greek governments always ask the controller to find out by ANY MEAN , to return to the office with a % of the declaration as fraud, you may understand that anyone in Greece knows that even if he make a sincere one, he will have finally to pay more. Most of the controllers come and offer you, there sympathy, we make a arrangement, less % for the state and this for me. If you do not accept, then he raises the difference to a non supportable one, as he can not be in any way prosecute for a you are oblige now to pay the amount I wrote at the beginning.
    So. to solve the problem, you should start with a change in the mentality of the politicians, but as the problems, starts from there and their bribery, it can not be resolved.
    Greek tragedy!

  19. bill n

    Uh. YS’s uber-nemisis, Michael Lewis, scooped her on at least the title of this article in his article in Vanity Fair on Greece last oct. http://goo.gl/HpqN.

    As YS might say, Quelle Surprise.

    Y, this one has some more detail. This should be known as the Lewis-Smith observation, as in the Bose-Einstein modle.


    1. Foppe

      It’s a nice article until it gets to the conclusion. (And the ending of the part about the monks is utterly weird.)

  20. curlydan

    from what i’ve heard, the problem is not so much with the tax system on the whole as this article seems to say, but with the tax collection of the richest citizens.

    i’ve heard that the public sector tax collection is quite efficient–they take it directly from the paycheck. so it will be quite counter-productive for the greeks to reduce the public sector with austerity and shift to the private sector where tax collection is more difficult.

    again, it’s really the greed of the rich both inside and outside of greece that’s killing/torching all around it.

    1. /L

      That is probable so. Now let say that much of the deficient tax collection in general besides the wealthy is due to high degree of self employment (that is hard to control anywhere) it is not farfetched to assume that these low-level mom and pop businesses operating in a more or less grey sector where competition have adjusted their price level to their expenses. So if these were to be taxed in an appropriate way they would be forced to raise their prices and many of them would go broke and be unemployed.

      A high degree of self-employment and mom and pop business is generally an sign of low productivity, they put in many hours but productivity is low due to low degree of capital in stuff that increase productivity.

      It would probably be good if Greece in general could raise productivity more and have less self-employment and mom and pop business but if not that happen efficient taxation on this sector would probably at best be a zero sum game.

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