Greece's war on tax evaders shows new urgency

By Dina Kyriakidou |and Greg Roumeliotis

"All I needed to wrap it up was to confirm at least one case of overpricing," the investigator says with a small smile of satisfaction. "This case was sent to us from the US. It took two of us just a few months to almost crack it."

The case - and hundreds of investigations like it - is part of Greece's new war on tax evasion. Athens has long struggled to collect enough tax revenues to cover what it spends.

According to Eurostat, when you exclude social security contributions Greece has the lowest ratio of tax revenue to gross domestic product (GDP) in the euro zone, at 20.4 percent.

The black market makes up close to a third of the country's e240 billion (R2.2 trillion) economy, compared with 27 percent in Italy and 15 percent in Germany, according to the most recent World Bank estimates.

Now, as part of its e110bn rescue deal with the EU and the International Monetary Fund (IMF), Greece has vowed to go after tax dodgers and end what the IMF has called "wide tax evasion and corruption."

The success of this effort will go a long way to determining Greece's financial future. The country's top commercial bank, National, believes better collection could boost revenues by up to e9bn a year, equivalent to 3.8 percent of GDP, or more than a third of the sum Athens has pledged to lop off its budget deficit over the next four years.

The Socialist government hopes toughening up on taxes will not only stave off the threat of sovereign default, but also transform the political and economic relationship between the state and Greece's 11 million citizens.

"We are called today to stage a revolution," Prime Minister George Papandreou said on the island of Crete last month. "To turn the crisis into an opportunity for changes that have been needed for decades."

Dressed in a bright pink T-shirt, pants and scarf, rose-coloured high heels and with shiny pink loops dangling from her ears, the tax inspector on the pharmaceuticals case is, at first glance, an unlikely revolutionary.

But as her gaze flicks from the confiscated files on her computer screen to the paper records on her desk, she has the air of a quiet crusader. The 40-year old mother of two, who asked to remain anonymous so she could speak more freely, was an economic analyst in the private sector before moving to a state job a decade ago.

Attracted by regular hours that made it easier to raise her daughters, she says the crackdown on tax evaders has forced her to take home thick case files to study at night: "I now work as hard but make a lot less."

Like all Greek public servants she has been hit in recent months by government pay cuts. The average state worker now takes home 14 percent less in their pay packet than at the end of last year. Still, she says, she and her colleagues remain determined to turn things around.

This is not the first time a Greek government has promised to go after tax evaders. |Almost every government over the past two decades has said they would put a stop to tax dodging for the benefit of all.

But there is reason for hope this time round, if only because the accumulation of failed promises in the past has helped fuel such a deep and dangerous crisis.

In April, Papandreou's government passed a law that forces small businesses to use cash registers and requires all payroll and business transactions to be carried out through bank accounts. The new law empowers auditors to levy fines directly and confiscate assets for debt liabilities to the state.

The government has set up a hotline to report incidents of bribery or tax evasion and introduced rewards for |information leading to arrests for those crimes.

It also relaunched the Financial and Economic Crimes Unit, which was effectively inert during five years of conservative rule.

Reporting directly to the finance minister, the unit investigates both independently and in collaboration with judicial authorities. It employs 1 300 staff nationwide.

In a March speech, Papandreou, the son and grandson of former Greek leaders, made the tax system his number one priority. "To give you just one measure of the scope of that problem: Fewer than 5 000 Greeks declare incomes of e100 000 or more," he said. "And that pattern must end, and it will end." - Reuters

Source: http://www.busrep.co.za/index.php?fArticleId=5598102&fSectionId=565&fSetId=662

Photo: An employee of Greece's Financial and Economic Crimes Unit performs a search amongst confiscated boxes inside a warehouse in Athens July 23, 2010. Greece has vowed to go after tax dodgers and end what the IMF has called "wide tax evasion and corruption" as part of its 110 billion euro ($143 billion) rescue deal with the European Union and the International Monetary Fund (IMF). The Financial and Economic Crimes Unit reports directly to the Finance Minister and investigates both independently and in collaboration with judicial authorities, who often refer cases to it. Picture taken July 23, 2010. GREECE-TAX/ REUTERS/John Kolesidis