Paul L. Caron

Monday, May 13, 2013

NY Times: Greek Crackdown on Tax Evasion Yields Little Revenue

New York Times:  Greek Crackdown on Tax Evasion Yields Little Revenue:

If ignominy were tax revenue, Greece might be a big step closer to ending its budget problems. Politicians, business executives and bankers are being raked through the headlines or incarcerated in a white-collar crackdown as the Greek government goes after people suspected of tax dodging. Those under questioning include the former finance minister George Papaconstantinou, in a highly charged parliamentary investigation into his handling of a list of Greeks with foreign bank accounts. ...

Tax evasion lies at the heart of the Greek financial collapse, which has resulted in international bailout loans exceeding 205 billion euros, or $266 billion, the size of Greece’s depressed economy. In fact, Greece’s international creditors have made revamping its notoriously lax tax system a primary condition for any additional bailout financing.

But even after an overhaul of Greece’s tax collection apparatus — and a politically charged campaign to pursue delinquents — government officials have collected only a tiny fraction of what is owed and potentially collectible.

Rather than capture a lot of extra money, the crusade seems mainly to have captured prominent quarry. The net cast by newly empowered prosecutors has snared the former mayor of Salonika, the leader of the Greek national statistical agency and several former cabinet members.

Lawyers and tax officials estimate that hundreds of people have been locked up in the last year, suspected of tax evasion. Under the new laws, someone who owes the government more than 10,000 euros in taxes can be arrested on the spot and given the choice between paying up or being put behind bars. While held, the suspect can wait as long as 18 months before the prosecutor decides on a formal charge.

Despite those efforts, of the estimated 13 billion euros that government officials say is owed by Greece’s 1,500 biggest tax debtors, only about 19 million euros has been collected in the last two and a half years. ...

If Greece’s 1,500 biggest tax debtors paid, the government would easily wipe out its budget deficit for 2013. Analysts estimate that the taxes avoided by Greeks of all income levels total 55 billion euros, which would help Greece return to firmer financial footing.

(Hat Tip: Mike Talbert.)

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Typically the NYT has it wrong: tax evasion doesn't lie at the heart of the Greek financial collapse; Government profligacy does. Same goes for other troubled economies.

Henry Cybulski

Posted by: Henry Cybulski | May 14, 2013 11:00:53 AM

The trouble with cracking down on tax evaders in Greece is that absolutely everyone evades taxes. Gonna need a lot more prisons.

Posted by: Surellin | May 14, 2013 6:13:47 AM

1) Time for a flat tax. Scrape the entire code and replace it with a one page set of instructions.

2) Congress must demand a halt to further implementation of ObamaCare until the IRS roll is eliminated.

Posted by: Lester | May 14, 2013 5:34:17 AM