As the government of Prime Minister Antonis Samaras has put a $17.45 billion spending cut and tax hike plan before Parliament for a vote on Nov. 7, ship owners are fighting to keep their tax-free status and statistics show many self-employed and the country’s professionals are continuing to evade taxes.
While workers, pensioners and the poor have been hammered with 2 ½ years of pay cuts, tax hikes and slashed pensions, tax cheats are costing the country as much as $15 billion a year while some of the country’s richest people in the shipping industry pay no taxes at all.
The German news magazine Der Spiegel outlined the inequities in a piece that showed how far the country’s wealthy are willing to go to protect their privilege while the government keeps going after people who are among the most vulnerable.
That disparity is testing the coalition government led by the New Democracy leader Samaras, whose partners, the PASOK Socialists and Democratic Left, are facing defections in their ranks because they say they can no longer to continue to support austerity measures that are supposedly antithetical to party principles.
Der Spiegel said the study showed that undeclared income from self-employed Greeks was about 28 billion euros, or $36 billion, in 2009, a year before the country was forced to seek bailouts from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) which has demanded austerity in return. That cost the government about 11.2 billion euros, or $14.4 billion in one year, a bill that mounts every year.
Doctors income is reportedly 250 percent more than they report, and lawyers, economists, entertainers and journalists are also said to be among major tax cheats. “Tax evasion is not limited to the wealthy,” the study finds. “But tax evasion does increase in wealth, substantially.” One lawyer in Thessaloniki said that many attorneys report only the minimum fee of 300 euros ($385) for a court appearance they are required to charge for putting a case before a court, although they charge their clients many times more. “I know of wealthy lawyers who have been in the business for 30 years who do not pay a single euro in taxes. Some of them even boast of getting tax returns,” he said.
TAX THE POOR, NOT THE RICH
Meanwhile, a previous PASOK Socialist government when its current leader Evangelos Venizelos was finance minister, doubled income and property taxes on wage-earners who have taxes deducted from their checks, and taxed the poor. The government was embarrassed when an investigative journalist released a list of 2,059 Greeks with $1.95 billion in deposits in a Swiss bank that hadn’t been checked for tax evasion and still hasn’t.
The study found that only 200 people in a country of 11 million have declared incomes of more than 500,000 euros, or $642,294 a year. A few years ago it was reported that only six Greeks reported an income of more than $1 million, despite a plethora of shipowners, entertainers, athletes, business executives and entrepreneurs.
Manthos Neofitidis, a 35-year-old who once worked in a retail chain, is likewise furious. “This mess we are in was caused by the few who pull the strings, leaving us to eat stale bread and not giving a damn,” told Der Spiegel. “They don’t care if people die, so long as they fill their own pockets.”
Even Finance Minister Yiannis Stournaras agreed with that portrayal. Before taking his post he was head of the influential Institute for Economic and Industrial Studies (IOBE). Eight months before taking the finance minister job he said in an interview that Greece “is a poor country with rich people” who do not pay taxes. But he’s finding it difficult to get the government to tax those people with big incomes.
Ship owners benefit from dozens of tax exemptions meant to guarantee their competitiveness and successive governments have left their special status untouched and it has barely been mentioned by Troika envoys who are insisting on more pay cuts, tax hikes and slashed pensions for everyone else.
Samaras is said to have recently reached an agreement with shipping magnates on the introduction of a new cargo tax. It won’t, though make a huge difference. Given a sovereign debt load of some 350 billion euros ($449.7 billion,) the 200 million euros ($256.9 million) such a tax will bring in by 2016 is almost insignificant given the country’s debt problems.
Shipping industry representatives argue that a substantial increase in their tax burden would drive away companies and cost jobs in Greece, already suffering from high unemployment. “If Greece taxed shippers, it would be just for show and it would be like shooting itself in the foot,” says one industry expert who asked not to be identified. “The shipping industry is extremely internationalized … and is favorably treated by tax regimes all over the world – perhaps nowhere more so than in Germany itself,” referring to the biggest contributor to $325 billion in two international bailouts.
Greece is considering the establishment of a 100-strong unit to go after wealthy tax evaders but similar efforts have failed miserably. Out of 5,000 cases of suspected of tax evasion gleaned from Greek bank records, only 334 have been settled. And with Greece’s notoriously slow bureaucracy and judiciary, it could be years before the state actually receives any extra cash from wealthy tax-dodgers.