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Tuesday, October 29, 2013

NY Times: Greece’s Aggressive Pursuit of Tax Evaders Collects More Anger Than Money

Greek Flag (2013)New York Times:  Greece’s Aggressive Pursuit of Tax Evaders Appears to Collect More Anger Than Money:

If Greece is ever going to get its public finances in order and escape grinding budget austerity, it will have to do a better job collecting taxes. For years, economists have pointed to rampant tax evasion as one of the country’s most serious problems, depriving the government of money it badly needs.

But as the confrontation in Archanes shows, the effort to collect taxes has not gone well; having inspectors run out of town is hardly evidence that the rule of law is taking root in the Greek economy. Rather than instilling a sense of fairness, the more aggressive tax collection program in some ways appears to have aggravated the problem. In particular, attempts to cast a broad net have only fueled public anger at the wealthy, who are often seen as the main culprits.

In the early days of the economic crisis here, Greek officials optimistically predicted that tax collection would soon improve. They bragged of using aerial photographs to get tax evaders who failed to declare their swimming pools on tax returns as required. They zeroed in on doctors who reported low incomes but who somehow paid high rents in affluent neighborhoods.

But despite such headline-grabbing efforts and an astonishing number of new tax laws (22 in the last two years), some question whether the authorities are actually making progress. At the end of 2011, tax arrears totaled 45 billion euros, or about $62.1 billion. At the end of 2012, €56 billion, or about $77.3 billion. At the end of July, with the most active tax period to come, the arrears had risen to €60 billion, or almost $83 billion, equivalent to nearly a fifth of the government’s public debt.

Experts say many of the tax collection measures are not effective, especially those aimed at the rich. Taxing yacht owners, for instance, only encouraged them to moor their boats elsewhere, emptying Greek marinas.

Efforts to overhaul the tax system, many accountants say, have created such a confusing jumble of laws that it will take months, if not years, to understand them. Consolidating and reorganizing the tax bureaus, intended to save money in the long run, has created an administrative nightmare in the short run, with files arriving months after a move, if at all, union officials say.

But perhaps as troublesome, some experts say, is the growing grass-roots anger that led the customers to turn against the four tax inspectors recently in Archanes. Tax collectors have been threatened or chased out of many towns, union officials say, though only a few cases, like the one here, get much attention. ...

Next year, Greek officials will also have to give up on one tax collection system that has worked well so far: attaching property tax bills to electric bills. The courts have ruled that the threat of losing electricity is illegal.

(Hat Tip: Mike Talbert.)

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