Tax Hikes Backfire, Greece’s Revenues Plummet

Tax Hikes Backfire, Greece’s Revenues Plummet

Greek_taxDespite big tax hikes as part of austerity measures demanded by international lenders, tax revenues fell precipitously in January, with the Greek Finance Ministry reporting a 16 percent decrease from a year earlier, and a loss of 775 million euros, or $1.05 billion in one month.

The government took in only 4.05 billion euros ($5.47 billion) in tax revenues in January, far short of its target of 4.36 billion euros ($5.89 billion), a $420 million shortfall in one month, and during an annual holiday sales period for shops who are bleeding customers and shutting down by the thousands.

If Greece fails to meet revenue targets it will trigger a correction clause at the end of each quarter of the year, setting off automatic spending cuts except for pensions and salaries. That could further harm already-depleted government services.

Finance Ministry officials attributed the decline in tax revenues to the drop in consumption, as revenues from Value Added Tax (VAT) shrank by 15 percent, while those from the special consumption taxes were also lower. Greeks hammered by big pay cuts, tax hikes and slashed pensions have cut back spending even on essential items, with supermarket sales falling 500 million euros, ($6763 million) in 2012.

The numbers could have been worse as the government gained revenues from doubled property taxes and big hikes in income taxes that have hit most Greeks except for tax cheats who continue to largely escape sacrifice or prosecution.

Direct tax revenues increased by about 9 to 10 percent in January compared with a year earlier. Given the country’s devastating recession, which has created a record 26.8 percent unemployment and is in its sixth year, the only options left for the government is to collect from tax evaders and improve tax collections, although tax hikes have led to many more Greeks trying to hide their income, statistics showed.

The Troika and other EU countries offered to help Greece collect taxes but little interest has been shown by the government. The new General Secretary for State Revenues, Haris Theoharis, plans to meet directors of the 36 biggest tax offices in the country to study ways of collecting expired debts, according to proposals by the country’s creditors and the European Commission’s Task Force for Greece.

Expired debts have topped 56 billion euros, ($75.8 billion) including a jump last year of 13 billion euros ($17.59 billion) more. The newspaper Kathimerini reported that the Financial Crimes Squad (SDOE) is in disarray, doing little else than checking anonymous allegations of non-payment of taxes and not doing active investigations of high-profile cases.

The government tried to offset the bad news with a report that, thanks to austerity, the country’s deficit had fallen from 9.4 percent in 2011 to 6.5 percent last year. The ceiling set by the Eurozone, the 17 countries that use the euro and of which Greece is a member, is 3 percent.

  • worldarts

    More PROOF the phoney “Government of Convenience” is on its way out sooner than you think!

  • http://pulse.yahoo.com/_HDV4GI6CHKTCVEXRQENW7DA2LI da

    Who would have thought? You mean austerity actually kills revenues and business? No one could have predicted that.

  • Lau

    Yeah lets increase the tax rate even further. that will solve all problems

  • Alex

    Cuts in government spending don’t kill tax revenues but if we tax our business too high it will.

  • Alex

     Hey commie boy (or SKopian pretending to be Greek)…. here is what your beloved treasonous communists really stand for. The destruction of Greece.

    “The whole
    idea of national sovereign rights, Theodoridis said, is an invention of
    official state propaganda “to extract the consent of the oppressed
    masses.”

    http://greece.greekreporter.com/2013/02/07/syriza-sacks-mp-for-backing-turkey/

  • Alex

    Our taxes our too high in the long view of things but are necessary in the short term because we have to meet terms of bail out and work on balancing budgets.  The shrinking economy isn’t primarily due to our tax hikes as this article claim (at least not signficantly yet)

    Sweden has far higher taxes than Greece and its doing far far better than Greece.,
    http://en.wikipedia.org/wiki/Taxation_in_Sweden

    It has more to do with lack of investment confidence in Greece. How can anyone do business in Greece with leftists and anarchists constantly striking (paralyzing our economy) as well as the constant riots.  Who would invest in such a politically unstable situation? In addition too many Greeks are whining for handouts, not enough focusing on trying to produce something.

  • Alex

    “although tax hikes have led to many more Greeks trying to hide their income, statistics showed.”

    The tax cheats are now the fault of the government…. not the behavior of tax cheats themselves?

  • Alithia

    If you can’t take any more money from the people in taxes, simply confiscate and sell their homes and cars. Oh wait, there will nobody to buy them because everybody is broke. 

    Greek politicians have reached a new level of stupid. In fact, they now stand alone in a world class level of stupid. They are afraid to cut jobs so they resort to stripping an entire society in ever increasing tax demand, in an ever diminishing ability to pay them. 

    Brilliant. 

  • Alex

     I agree with most things you say Alithia but not this point. We have to choose cuts to balance budgets or communists. Our current government under Samaras has done a fantastic job slashing spending and cutting down flow of illegals. At the start of this mess we were around 15 percent deficit. We are now at 6 and very close to pre-interest surplus. When we have that surplus we’ll have more leverage with creditors. They can’t say we are overspending at that point and we will have more wiggingly room in ongoing negotiations for debt relief.

    In addition undermining our middle ground parties by trying to lump our coalition government as against the Greek people only plays into the hands of communists and anarchists. For all their mistakes our middle ground coalition government is our last chance. After that we start looking at things like decline into communist 3rd world banana republic and/or civil war.

  • Tzak12345678

    Alex, I get the feeling that you disagree the reporting of misdemeanours from our middle ground politicians. While I agree with you that we need to support our middle ground parties, I still believe that journalists should report the rights and the wrongs from politicians/parties on all sides of the political spectrum.

    For example we still dont have an answer why Akis is still in prison awaiting trial and the MOST imprtant why is it accepted that Greek politicians have immunity from prosecution. I belive the latter erodes the faith that we Greeks have in our own justice system.

    Keen to read your thoughts.

  • Alex

    I agree completely with you that we have to report wrongdoings of any politician. Where my issues is with how leftists go about reporting it.

    They constantly try to weave stories that there is some sort of fascist conspiracy in our coalition government (who are both right AND left) against the Greek people.

    For instance, rather than attack an individual MP that smoked cigarettes in parliament (setting a bad example of lawlessness) Andy wrote his story in such a way that tries to pit all our lawmakers as lawless. I know Andy means well and isn’t a communiust but if keeps writing stories phrased this way he only ends up helping communists.

    This paranoia hyperbole (of primarily leftists and anarchists) is  destabilizing our country.  We can’t be against everyone and everything and point fingers at everyone else. We have to stand for something too. We also have to praise politicians that we think are doing a good job not lump every politician as being the same. I sincerely believe Samaras is doing that. He’s not perfect but he has been making changes that seem to be helping us getting closer to balancing budgets and taking control of our borders.

    The other factor here is politicians are not magicians we should be expecting to fix our economy. Their primary job is to balance budgets and defense. Our job is to created jobs and industry.

  • Cypriot

    Exit the EuroZone and start fresh.

  • Tzak12345678

    I would also add to your last paragraph is that politicians job is to set laws an regulations. However the integrity in their ability to set and request us Greeks to abide such laws is comprimised when they themselves are immune from prosection.

    What is disappointing is that next to zero journalists and barely any bloggers seem to make this an issue.

    We as Greeks will erode if we dont have faith in our justice system as it is unfarly set and applied - that is my point.

  • Alex

    Our government isn’t a junta. Its a democracy. The shareholders of this democracy voted their leaders. They also hold moral responsibility for that.

    Part of the problem is we have laws to protect private property but nearly 1/3 of the country doesn’t really believe in or respect private property. The think they are owed handouts/

    It makes if difficult to enforce the law. Our politicians are not single handedly to blame for this mentality. It is many Greeks themselves that think this way. Too many anarchists and communists.

    Again, I’m not saying there isn’t problems or corruption in the government but the solutions to our economy are to be found in the private sector not waiting around for the government to fix things for us. Scapegoating our government for a lack of production among the Greek people isn’t a way to fix our problem. Greeks should be thinking about how to start businesses. How to innovate and leverage technology to make their businesses competitive.

  • Tzak12345678

    Agree with what you say about technoclogy, business etc this should be bread and butter stuff as we Greeks are historically true capitalitsts and still are…look at Greeks thriving outside of Greece.

    Yes we as shareholders elect the leaders but as leaders they should lead by example and provide this example to how Hellenes should go about their business.

    But then again if most Greeks dont seem to mind and continously elect these types of leaders…then there is not much that we can do..well until the walls falls start falling in.

  • Alex

    There are extremely successful Greek businessmen in the diaspora that run brand name multinationals . So why don’t we have Greeks like them in Greece proper? Whats the difference?

    One of the differences is in the successful western countries you have very few radical leftists and anarchists. These people in Greece however have been disrupting our economy for decades with excessive strikes and excessive union demands.  (even today opening a business in Greece is a regulatory nightmare)

    Many of them are anti-business to the point of absurdity. They see big business as a negative rather than a positive.  When a Greek business starts to grow they attack it in the name of “equality” and petty envy rather than nurture it. It prevents us being able to leverage economies of scale that big businesses provide.

    Greece has one of the highest small business ratios in the world… which actually harms our economy. Even small countries like Sweden has their Ikeas. Finland their Nokias. What do we have? Our most successful industry is shipping… and its exactly the one with fewest taxes and regulations. This is not a coincidence.

    Too much state control to combat “corruption” ends up with too much bureaucracy that ends up being worse than the corruption.  (e.g. Cuba was much better off economically under their prior corrupt government than the communists)

    The bottom line is we have to build large Greek multinationals. That’s not the job of our government to do. That’s our job. If we want to achieve this we have to focus not on blaming our government for everything but on a pro-business pro-technology attitude (to improve productivity to be able to compete)

    Had we not been a democracy and been run by communist dicatorship perhaps I would have felt different but I put the primary blame for our situation on the Greek people themselves . No was stopping any Greek from developing a cure to cancer. A quantum computer. A more efficient payload delivery system to space but we have been too busy selling trinkets, boasting about ancient glories and begging for handouts.

  • http://www.bournias.net/ P. Bournias

    Any fool could have seen that this was going to happen except “the most intelligent politicians in the world.”  The other day listening to the radio they reported that gasoline sales were down 30%, gee I guess that with a huge number of people turning in their license plates no one figured that was going to happen.  Then to top it off the government raises the price of gasoline.
    Same thing with heating oil.

    Real knowledge is to know the extent of one’s ignorance. Confucius

    All the perplexities, confusion and distress in America arise, not from defects in their Constitution or Confederation, not from want of honor or virtue, so much as from the downright ignorance of the nature of coin, credit and circulation.
    John Adams

    I know nothing except the fact of my ignorance. Socrates

  • worldarts

    The Greek People can simply not take anymore austerity measures and are wondering why the Government itself has not cut back on MPs represented there and their salaries cut to show an example– Why isn’t the Press covering this and why have they not asked why Akis Tzahadsopolous who has been in jail for a year now still awaiting his trial? Is he really in jail or not? Why not a word from him to the Press? You so-called “journalists” in the Media don’t find this rather curious?

    Where is the Justice here and where is the Greek Press to investigate and ask questions???

  • worldarts

    Why don’t they start by confinscating MPs illegal properties to show us an example?
    Let these sleazy Politicians “practice what they preach!”

  • worldarts

    Bravo Tzak— Now you’re talking… Let Justice start working in Greece !

  • Alex

    Uhmmm… in case you didn’t notice Tzak is against communist buffoons like you.

  • Alex

    And what do you propose commie boy? That we ignore terms of the bailout? And when the billions stop flowing from EU/IMF to feed you what will you do then? When your mommy is finally forced to kick you out of her home because her pension is cut even further and she loses her life savings because our banks aren’t being recapitalized… what will you do then?

  • Alex

     There are many sleezy middle class and poor too commie boy. Are you even Greek world arts? I’ve asked many times but you keep avoiding answering the question.

  • Alex

     Taxes in Greece are less than they are in Sweden but Sweden is doing quite well. The difference is people Sweden produces things. What do we produce other that moralistic hot air speeches by communist and anarchists always demanding more and more from the government? (i.e. other Greeks)

    The fault for lack of production isn’t to be found in our government. This is the responsibility of Greeks themselves. As long as we point fingers in the wrong direction through endless strikes and riots shamelessly begging for handouts, we will go nowhere. What we should each be doing is focusing on education and technology to try and improve productivity in Greece not waiting around for the government to fix things for us.

     

  • Alex

    Exiting Eurozone would automatically lead to masssive funding cut from EU/IMF. When that money stops going to help fund our government and recapitalize our banks what do you think will be the effect other than even more draconian austarity and the loss of the life savings of many people as our banks fold into bankruptcy?

  • Alex

    “The Troika and other EU countries offered to help Greece collect taxes but little interest has been shown by the government.”

    More ridiculous narrative nonsense “facts”,

    Of course our government is spending a great deal of effort looking into ways to crack down on tax evasion. 

    Perhaps Andy would like to go around and doing all the audits and cross referencing them with assets? Perhaps And is going to build us the computers, the datamining queries, the security audits for systems? Andy is going to integrate those system with  banks, property, stocks, and other databases that indicate what assets Greeks own. Andy is going to do the data entry for other forms of undocumented assets?.And of course Andy is going to achieve this all by next week.

    And if he doesn’t, we will just say Andy shows “little interest”  in collecting taxes. We should then slander him by constantly insinuating he is part of some conspiracy of the elite versus the poor. Maybe even cheating on his taxes like so many other leftist that keep getting caught.

  • Cypriot

    Of course there will be severe consequences, but in result we get full control over our economy which is exactly what we need.

  • Alex

    If you mean in that context, its certainly an option.

    I don’t actually mind austarity up to now. We had to do this to balance budgets. However now that we are closer to doing that I am paying very close attention to how much debt relief EU/IMF are going to do and how they are handling FYROM situation. If the EU sticks by us on FYROM issue, I strongly support staying in the EU. If they try to navigate around us on the issue and pretend not to notice the behavior of the Skopians, then I support leaving it.

    At least that will give us back full sovereignty as you say. We can then go about more easily kicking out illegals and building up our military for war. (only matter of time before Turks and Skopians try to tag team us in Macedonia)

  • Cypriot

    This isn’t about staying in the EU, it’s about staying in the EuroZone. We can default and leave the EuroZone whilst remaining in the EU. We may not be liked, but we will be able to resolve our economical issues, possibly ‘return’ to being a productive economy, and will actually be able to contribute more to the EU given our new wealth. It appears as though we will default. The austerity isn’t working, as many had stated at the beginning. I continue to support defaulting as it is the only option and has been for centuries. Look at Argentina and Iceland for more recent stories of defaulting.

  • Alex

    Icelands debt was trivial..  Argentina debt was a fraction of our own with 4 times our population.

    Even putting aside the moral aspect of being deadbeats that just walked away from out debts, we would need balance budgets… and that would still require austerity. There is no way to avoid it. Inputs have to much outputs. Simple mathematics. No amount of communist or anarchists union whining will change the laws of accounting.

  • http://profile.yahoo.com/AMZSM4XAJY37ZF5WWVKNOAPMGQ 1 citizen amongst many

    Here’s a thought for our Finance Minister, who I believe is actually trying to make things work unlike most if not all of his predecessors – never, not once throughout history has increasing taxes during a time of austerity led to an increase in tax revenue.  On the contrary, its main purpose seems to be to promote an underground or black economy that actually robs the state of its much needed tax revenue.  The solution - LOWER taxes across the board BUT make a concerted effort to collect them without prejudice and stamp out corruption, in other words, make ‘no tolerance’ your value proposition.  Many of the contributors have provided workable solutions to the former.  As to the latter, its called going undercover to get the evidence.  Do you know how many doctors still insist upon fakelakia from patients?  How about lawyers ‘guranteeing’ justice?  Taxi drivers who claim their onboard receipt registers fail to work?  Plumbers, electricians and the like whose bills are substantially higher if you ask for a timologio?  Bottom line – lower the tax rate and collect those in arrears.    

  • Cypriot

     Of course you don’t mind these measures….they have not effected you because you are not living in Greece.

  • Mekima Kaityri

    ‘Greek politicians have immunity from prosecution’This is the reason we have a stalemate, and an unwillingness to initiate meaningful reforms. Things can never change and a point I have been making all along.
    Again, surely this law needs to be dissolved to move forward.
    So many are implicated directly in illegal activity or simply guilty through enabling it to continue. From the top down through all levels of society.
    Any party which pledges to dissolve this protection and convict the real criminals, break the power , of those they work for, 30/40 year cycles of political sameness and release Greece from its crippling and now 3rd world slavery, of uncompetitiveness, deserves a chance at leadership.
    Why can’t ‘Alex’ ever comment on this. 

  • Mekima Kaityri

    Alex, 
    you are now fully out of your depth here.Please just shut up and listen for once, hopefully you might learn something about politics economics, currency printing, value manipulation / trade.
    Unless Greece has its own currency, it will always be reliant on bailouts, even if it only serves to meet interest repayments on these LOANS and subsequent austerity.