Greece Halts Tax Refunds, Stops Paying Everyone

ATHENS – If a Greek taxpayer has not received a long-delayed tax refund yet, don’t look for a check in the mail: it’s not coming. As austerity measures have failed, resulting in a deep recession, a soaring deficit, and lowered tax expectations, the government has decided to stop sending tax refunds to people who are owed them – including pensioners – and will generally stop paying its bills.
The Finance Ministry is desperately seeking ways to contain a 10 percent deficit that has swollen due to additional grants to social security funds totaling 0.5-0.9 percent of Gross Domestic Product (GDP), and also because pay cuts, tax hikes, slashed pensions and thousands of layoffs have made Greeks keep their hands in the pockets and slow spending, causing more than 100,000 businesses to fail.
Finance Minister Evangelos Venizelos, who has imposed wave after wave of Draconian tax hikes on workers, pensioners and the poor, while still holding in his hand a list of 6,000 tax evaders who owe the country $60 billion and won’t pay, met with high-level ministry officials and agreed to issue an order to the country’s tax authorities to immediately stop paying tax returns to taxpayers, companies and state suppliers. Greece is years behind on payments to many creditors, going back to before April 2010, the start of the era of austerity, and some suppliers now refuse to send additional materials and goods.
They also decided to promote a new regulation at the start of 2012 allowing for old debts to be paid in 60 installments, at a minimum sum of 300 euros ($392) each, to try to bring more revenues into the state coffers. Provisional figures for the first 10 days of December showed that public revenues remained at low levels, despite better-than-expected payments of a property tax surcharge put into electric bills; also, many customers will have to be rebated because of numerous errors in assessing what was due. A second income tax also has wiped out already reduced Christmas bonuses for many workers, creating the possibility of a dire holiday season for shop owners.
State revenues are expected to lag behind the revised target for 2011 by at least 1.5 billion euros ($1.96 billion), while the excess on the expenditure side will be calculated after the amount granted to the social security funds is established. Officials said the only way to reduce the damage done to the 2011 budget by insufficient revenues is through further cuts to the Public Investment Program, but even then the deficit will be impossible to bring below 10 percent. Alternate Finance Minister Filippos Sachinidis admitted in Parliament that both the government and its creditors have failed in their estimates for Greece’s economy and the only option was to stop paying what it owes while demanding more taxes.
The economic crisis caused the collapse of the former Administration of then-Prime Minister George Papandreou, who resigned on Nov. 11 to make way for a coalition government headed by former European Central Bank Vice-President Lucas Papademos that is trying to negotiate a second bailout of $175 billion, because a first rescue package of $152 billion in loans has failed to slow the country’s slide toward default.