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Tax evasion and corruption in Greece

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Title: Tax evasion and corruption in Greece  
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Subject: Greek government-debt crisis, Taxation in Greece, Economy of Africa, Greek financial audits, 2009–10, Greek government formation, May 2012
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Tax evasion and corruption in Greece

Tax evasion and political corruption exist in Greece.[1][2] This is to the extent that tax evasion has been described by Greek politicians as “a national sport” - with up to €30 billion per year going uncollected.[3]

Political corruption is acknowledged as a significant problem by many observers, but some believe its size has been overestimated by international media (see Criticism below). According to Transparency International Greece’s National Integrity Assessment 2012, the problem of corruption in Greece is the confluence of many factors, including a weak enforcement of the law, a lack of audits, the absence of codes of conduct, the non-transparency of government activities, an inefficient bureaucracy, government impunity and broad discretionary powers and a law of public awareness.[4]

According to Transparency International’s Global Corruption Barometer 2013, 90% of surveyed households consider political parties to be corrupt or extremely corrupt - ranking as the most corrupt institution in Greece. Furthermore, 39% of the surveyed households believe that the level of corruption has increased a lot, and 46% of surveyed households find government efforts in the fight against corruption to be very ineffective.[5]

The government’s corruption efforts have not been evaluated as effective, according to several sources, which has been attributed to lax enforcement of anti-corruption legislation and the ineffectiveness of anti-corruption agencies. Anti-corruption agencies have been hindered by excessive political influence and continuous replacement of staff. Recent involvement of high-ranking public officials in corruption cases has been reported in the media[6][7] (see corruption cases below).

Contents

  • Alleged origin of Greek corruption 1
  • Extent of Greek tax evasion 2
    • Fakelaki ("little envelope") 2.1
  • Government efforts at revenue collection 3
    • Anticorruption measures 3.1
    • Tax collection improvements 3.2
    • Forokarta ("tax card") 3.3
  • Greek media dynamics 4
  • Corruption cases 5
  • See also 6
  • References 7
  • External resources 8

Alleged origin of Greek corruption

Commentators both within and outside Greece have attributed this flaw in Greek culture to a mismanagement of Ottoman Greece by the Ottoman Empire. In Ottoman-occupied Greece tax resistance became a form of patriotism,[8][9] and property and commercial tax systems were left in shambles.[10]

Extent of Greek tax evasion

Vatopedi monastery, which dates from the 10th century. The leadership of the monastery allegedly was involved in corrupt activities, working in collusion with corrupt Greek government officials to embezzle federal government funds.[11]

The OECD estimated in August 2009 that the size of the Greek black market to be around €65bn (equal to 25% of GDP), resulting each year in €20bn of unpaid taxes.[12] This was in comparison almost twice as big as the German black market (estimated to 15% of GDP).[13] Data for 2012[14]place the Greek "black market" at 24.3% of GDP, compared with 28.6% for Estonia, 26.5% for Latvia, 21.6% for Italy, 17.1% for Belgium and 13.5% for Germany. There is however a correlation with the percentage of Greek population that is self-employed[15] (31.9% in Greece vs. 15% EU average[16]), as several studies[17][18] have shown the clear correlation between tax evasion and self-employment.

Several successive Greek governments had in the past attempted to improve the situation, but all failed due to tax evasion's place within Greek culture. A rapid increase in government revenues through implementing a more effective tax collecting system has been recommended. Implementing the proper reforms, is however estimated to be a slow process, requiring at least two legislative periods before they start to work.[13]

In the last quarter of 2005, participation in tax evasion reached an estimated 49% of the population,[2] while in January 2006 it fell to 41.6%.[2] A study by researchers from the University of Chicago concluded that tax evasion in 2009 by self-employed professionals alone in Greece (accountants, dentists, lawyers, doctors, personal tutors and independent financial advisers) was €28 billion or 31% of the budget deficit that year.[1]

The Tax Justice Network has said that there are over €20 billion in Swiss bank accounts held by Greeks.[19] The former Finance Minister of Greece, Evangelos Venizelos, was quoted as saying “Around 15,000 individuals and companies owe the taxman 37 billion euros”.[20] Additionally, the TJN puts the number of Greek-owned off-shore companies to over 10,000.[21]

Fakelaki ("little envelope")

In Greek, fakelaki means "little envelope" but is also used in Greek popular culture as a jargon term referring to the bribery of public servants and private companies by Greek citizens in order to "expedite" service.[22] According to this practice, sums of money are stuffed in the files and passed across the desk to secure appointments, documents approval and permits.[23] The term was mainly associated with the corruption amongst the medicines of the National Healthcare Service (ESY).

Government efforts at revenue collection

Following similar actions by the United Kingdom and Germany, the Greek government is in talks with Switzerland to tax bank accounts in Switzerland owned by Greek citizens.[24] The Ministry of Finance has revealed that Greek Swiss bank account holders will either have to pay a tax or reveal information such as the identity of the bank account holder to the Greek internal revenue services.[24] The Greek and Swiss governments are to reach a deal on the matter by the end of 2011.[24]

Anticorruption measures

The Inspector General of Public Administration[25] has started an online census of civil servants. In connection with this census he has uncovered a number criminal offenses, including an entire non-existent health authority.[26]

Tax collection improvements

In 2010 the government has implemented a tax reform. The year 2012 saw the introduction of a duty of non-cash payments for amounts over 1,500 Euros.[27][28]

The Greek police have established a special unit, which deals exclusively with tax offenses. Germany has offered experts from its financial management and tax investigation office to help build a more efficient tax administration.[29] However, months later it was not clear whether Greek officials would accept the offer.[30]

In November 2011, the new Greek finance minister Evangelos Venizelos called upon all persons who owe the state more than €150,000 to pay their outstanding taxes by 24 November or find their names on a black list published on the Internet. The government later revealed the list, which also includes a number of prominent Greeks, including pop stars and sportsmen.[31]

Forokarta ("tax card")

The Forokarta is a "tax card" proposed by the government of Greece in August 2011, which would be used to facilitate collection of receipts for purchases; this would allow the Greek finance ministry to clamp down on rampant tax evasion,[32][33] by comparing individuals' spending to their income, and by comparing business' actual revenues to their accounts.[34]

Greek media dynamics

The Greek government has refused to look into a list of 1,991 potential tax evaders with Swiss HSBC bank accounts it received in 2010 from former French finance minister Christine Lagarde. Initially, officials claimed at various times to have lost or misplaced the information. On 29 October 2012 the government changed its position saying it would not use stolen information to prosecute suspected offenders. Instead, Greek authorities arrested Kostas Vaxevanis, journalist and editor of the weekly magazine Hot Doc, who published the "Lagarde list".[35] He was charged for breaching privacy laws that could have seen him sentenced to two years in prison.[36] However after a trial lasting only a day, he was acquitted.[37]

The list includes an advisor to Greek prime minister Antonis Samaras, as well as a former minister and a member of Samaras' New Democracy political party. The list also contains the names of officials in the finance ministry.[38]

Mr Vaxevanis said he thought the government had not acted on the list because it included friends of ministers, businessmen and powerful publishers.[39] He also accused much of the Greek media of ignoring the story.[39] "The Greek press is muzzled," he said. "There is a closed system of power in Greece, wielded by the political elite, businessmen and journalists."[39]

Corruption cases

Greek government:

See also

Government finance:

General:

References

  1. ^ a b Inman, Phillip (9 September 2012) Primary Greek tax evaders are the professional classes The Guardian. Retrieved 6 October 2012
  2. ^ a b c Πτώση της φοροδιαφυγής στο 41,6% από 49% το τελευταίο εξάμηνο (in Ελληνικά). Ethnos. 2006. Retrieved 12 October 2011. 
  3. ^ "A national sport no more". The Economist. 3 November 2012. 
  4. ^ "National Integrity Assessment 2012- Greece". Transparency International. Retrieved 16 December 2013. 
  5. ^ "Global Corruption Barometer 2013". Transparency International. Retrieved 16 December 2013. 
  6. ^ "Greece Corruption Profile- Political Climate". Business Anti-Corruption Portal. Retrieved 16 December 2013. 
  7. ^ "2012 Human Rights Reports: Greece". The US Department of State. Retrieved 16 December 2013. 
  8. ^ Itano, Nicole (15 February 2010). "Taxing Times in Greece".  
  9. ^ Reguly, Eric (10 June 2011). "The roots of the Greek tragedy: bloated bureaucracy and tax evasion".  
  10. ^ Rozenweig, Luc; Stephane Monclare (Spring 2012). "Pour En Finir Avec Crise".   This is a transcript of an interview with Jean-Claude Juncker in which he mentions the Ottoman impact upon Greece's property and commercial tax systems.
  11. ^ Michael Lewis, "Beware of Greeks Bearing Bonds." Vanity Fair, 1 October 2010.
  12. ^ "Korruption und Steuerhinterziehung: Griechenland versinkt im Sumpf". Die Presse. 5 August 2009. Retrieved 5 May 2010. 
  13. ^ a b "Griechenland: Abkehr von den Fakelaki". zeit.de. 6 May 2010. 
  14. ^ "Will Euro Austerity Push the Shadow Economy Even Deeper Into the Dark?". Bloomberg. 6 December 2012. Retrieved 8 January 2014. 
  15. ^ "Greek Myths and Reality (p. 20)". ELIAMEP. 6 August 2013. Retrieved 6 January 2014. 
  16. ^ "Greece tops EU list for self-employment with 31.9% of Greeks working for themselves". Kathimerini. 7 June 2013. Retrieved 6 January 2014. 
  17. ^ "Tax Evasion and Self-Employment in a High-Tax Country: Evidence from Sweden". 2006. Retrieved 6 January 2014. 
  18. ^ "On income tax avoidance: the case of Germany". ZEW Discussion Papers, No. 93-05. March 1993. Retrieved 6 January 2014. 
  19. ^ "20 δισ. ευρώ έχουν κρύψει οι Έλληνες στην Ελβετία".  
  20. ^ Boyes, Roger. "Rich greeks pack up their troubles along with their euros". The Times. 
  21. ^ Υπερδύναμη στις οφ σορ η Ελλάδα (in Ελληνικά).  
  22. ^ "What's Wrong—and Right—With Greece". The Nation. Retrieved 20 July 2011. 
  23. ^ "Watchdog Journalism, Greece, "Fakelaki", and the World Bank". What's Next: Innovations in Newspapers blog. Retrieved 15 March 2010. 
  24. ^ a b c Μέχρι το τέλος του 2011 η συμφωνία για τη φορολόγηση των καταθέσεων στην Ελβετία [Deal to tax Swiss bank accounts to be reached by end of 2011] (in Ελληνικά).  
  25. ^ "Website of the General inspector of civil services". Gedd.gr. Retrieved 2012-05-16. 
  26. ^ SZ: Herkules versus Verwaltung, 16 July 2010
  27. ^ "Maßnahmen zur Bekämpfung der Steuerhinterziehung in Griechenland". Kosmidis & Partner Anwaltsgesellschaft. 2010-05-00. Retrieved 28 October 2011. 
  28. ^  
  29. ^ zeit.de 17. November 2011: Auf der Jagd nach den reichen Griechen. - Rund 60 Milliarden Euro an Steuern schulden die Griechen dem Staat. Die Regierung in Athen greift nun hart durch, unterstützt von einem Deutschen.
  30. ^ reuters.com 19 February 2012: Germany urges Greece to accept offers of help
  31. ^ Gerd Höhler (15 May 2010). """Griechenland: "Macht die Steuersünder dingfest!. Tagesspiegel. Retrieved 28 October 2011. 
  32. ^ "New tax system in the pipeline". 5 August 2011. Retrieved 24 August 2011. 
  33. ^ "Tax evasion: Dues and don’ts". The Economist. 12 August 2011. Retrieved 24 August 2011. 
  34. ^ "How the state will track your spending". 7 August 2011. Retrieved 24 August 2011. 
  35. ^ "Λίστα Λαγκάρντ". zougla. 26 October 2012. 
  36. ^ McElroy, Damien (30 October 2012). "Greek officials accused of persecution as 'Lagarde List' journalist appears in court". London: The Telegraph. 
  37. ^ "Greek bank list editor Costas Vaxevanis acquitted". BBC News. 1 November 2012. 
  38. ^ "The Controversial 'Lagarde List' Has Leaked, And It's Bad News For The Greek Prime Minister". Business Insider. 27 October 2012. 
  39. ^ a b c Mark Lowen, Greek journalist Costas Vaxevanis on trial over bank list, BBC News, November 1, 2012

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