ATHENS – With anxiety mounting that Greece might vote for anti-austerity parties in the June 17 elections and be forced to leave the Eurozone of 17 countries using the euro as a currency, more Greeks – already legendary tax evaders – have stopped paying taxes. A senior Finance Ministry official on May 23 said that tax revenues have fallen 10 percent while two tax officials who declined to be named told Reuters that May revenues fell by 15-30 percent in tax offices away from the major cities and relative wealth centers of Athens and Thessaloniki.
“People are suspending some payments because we are in a pre-election period and also because of uncertainty stemming from a potential Greek euro exit,” said the official, who requested anonymity.
Greece is surviving on a first bailout of $152 billion from the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) Troika and awaiting a second for $173 billion more, but the lenders are insisting on more of the austerity measures that have enraged Greeks. The Troika has warned the next government it must also make an additional $15 billion in cuts and adhere to reforms approved by a previous temporary government or the money pipeline could be shut off and Greece forced out of the Eurozone, return to the drachma and projections of a complete, overnight economic collapse. Without the next loan installments due in June, Greece will be unable to pay its workers and pensioners or bills and make its own loan payments to investors.
The full extent of Greece’s tax payment woes will become clear next month after about 250,000 of about 5.5 million tax returns due are completed, and early signs are that Greeks are slowing and ceasing payments. Latest official data showed Greece’s state budget revenues over the January-April period rose year-on-year to $20.3 billion, but fell short of a $20.9 billion target by some $600 million, due to lower than expected tax revenues in a contracting economy. The austerity measures have worsened a deep recession now in its fifth year, created 21.7 percent unemployment and led to the closing of 1,000 businesses a week.
A higher number of companies reporting losses has also hurt tax collection, the official said. Tax returns of small and medium-sized companies suggested about 60 percent were claiming losses for 2011, up from about 20 percent in 2010, said Abraam Panidis, head of Greece’s independent accountants’ union.
“People don’t have money to pay their taxes because of unemployment and recession,” said Panidis. “They are waiting until the last minute to collect the money they owe and then pay up.”
The falling tax receipts further complicate Greece’s efforts to lower its fiscal deficit to 7.3 percent of Gross Domestic Product this year from 9.3 percent in 2011. The revenue picture is even bleaker given the failure to go after tax evaders costing the country $72 billion. Earlier this year, nearly 200 were arrested, but none prosecuted, typical for Greece.
Greece is currently in the hands of a do-nothing caretaker government in charge until the elections. Still, temporary Finance Minister Giorgos Zanias said his main objective was to combat tax evasion and that he would personally contact all Greek tax office directors to press them to achieve revenue targets, a vow made by many previous Finance Ministers with few results.
“Right now, there is widespread tax evasion due to the fact that there is no government in place to enforce tax collection as foreseen in the bailout plan,” Panidis said.
(Sources: Reuters, Kathimerini)