Tax Crackdown Hasn't Paid Off For Greece

Originally published on May 18, 2011 7:03 pm

The European Union and the International Monetary Fund are still struggling over how to deal with the Greek debt crisis. When Greece received billions in international bailout loans last year, they demanded spending cuts and financial reform. They also wanted action on tax evasion, which, by some accounts, was costing Greece $30 billion a year.

But the Greek government's crackdown hasn't paid off — there's less money coming in than the experts had hoped.

Finding Evaders

At the Mikrolimano harbor in the port city of Piraeus, children play in the water as tanned men in Greek fishermen caps and designer polo shirts start up their yachts and take off.

Accountants say nearly all of the yacht owners claim their boats for business use and don't pay taxes on them. But that's likely to change: The government has created a special squad of tax inspectors specifically tasked with cracking down on powerboat and yacht owners.

An elegant man in his 60s who would only give his first name, Stelios, says he owns three luxury boats and insists he pays taxes on all of them. He knows most yacht owners don't.

He says people with big, luxury boats who avoid paying their taxes simply must pay them, and he thinks the new law that cracks down on them is fair and will help bring in money.

The tax police have already outed notorious tax evaders like pop singers, rich doctors and nightclub owners. They've been told to pay up or face jail time.

'We're Never Going To Catch Everyone'

There has been some progress: Tax income rose last year by more than 5 percent compared with 2009.

But that was still less than half of what international creditors wanted to see Greece bring in. Studies show that up to half of Greeks evade taxes. Many do it because they don't trust government or because they never got caught, says Leandros Rakintzis, the auditor general of Greece.

"So we're never going to catch everyone. The best we can do is try to raise the percentage of tax evaders caught," Rakintzis says. "I don't know any country that's managed to catch everyone."

But it's not just tax evasion that's depriving Greece of revenue. The financial crisis means Greeks are also making far less money, says Panos Tsakloglou, a professor at the Athens University of Economics and Business

"The effect of the crisis is that we have far lower incomes," Tsakloglou says. "There is quite a lot of fear going around at the moment, and as a result people are postponing their consumption decisions as much as they can. And as a result of this, we have all this economic decline, and this economic decline is bringing in less tax revenues."

Where Is The Money Going?

In Piraeus, accountant Antonis Mouzakis is busy preparing scores of tax filings ahead of this month's filing deadline. He says more than 60 percent of his clients are reporting massive drops in income. Many are facing bankruptcy.

Mouzakis says he has a client who owes hundreds of thousands of euros in taxes — and wants to pay so he won't be sent to jail. But the client's businesses are failing, and he has no money.

There are many Greeks who do pay their taxes. But many say they feel like fools for doing so. They ask: Where is the money going? They say schools and hospitals are terrible, and crime is rising.

Residents in the central Athens neighborhood of Victoria recently held a protest demanding an end to what they described as immigrant crime.

A 60-year-old grandmother who gave her name as Dimitra was there. She doesn't blame immigrants for the rising crime in her neighborhood — she blames the government. She says she feels wronged; as a law-abiding citizen who paid taxes her whole life, she says she's afraid to leave her house.

Economists say Greece faces years of recession and will need more loans. But creditors are demanding more action from the Greek government on tax evasion, and the current efforts don't seem to be working — the latest figures show that tax revenue dropped by 8 percent in the first quarter of this year.

Copyright 2018 NPR. To see more, visit http://www.npr.org/.

ROBERT SIEGEL, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.

MICHELE NORRIS, host:

And I'm Michele Norris.

When Greece received billions in bailout loans last year, the European Union and the International Monetary Fund demanded spending cuts and financial reform. They also wanted action on tax evasion, which by some accounts was costing Greece $30 billion a year.

But the Greek government's crackdown has not paid off, and there's less money coming in than the experts had hoped. From Athens, Joanna Kakissis explains why.

JOANNA KAKISSIS: The Mikrolimano harbor in the port city of Piraeus is busy on a Saturday. Children play in the water as tanned men in Greek fishermen hats and designer polo shirts start up their yachts and take off. It's an easy life that's about to take a difficult turn.

Accountants say nearly all of these yacht owners claim their boats for business use and don't pay taxes on them. That's likely to change. The government has created a special squad of tax inspectors specifically tasked with cracking down on powerboat and yacht owners.

An elegant man in his 60s who would only give his first name, Stelios, says he owns three luxury boats and insists he pays taxes on all of them. He knows most yacht owners don't.

STELIOS: (Speaking foreign language)

KAKISSIS: People with big luxury boats who avoid paying their taxes simply must pay them, he says. It will help us get money to pay our bills.

The tax police have already outed notorious tax evaders like pop singers, rich doctors and nightclub owners. They've been told to pay up or face jail time. There's been some progress. Tax income rose last year by more than five percent compared to 2009.

But that was still less than half of what international creditors wanted Greece to bring in. Studies show that up to half of Greeks evade taxes. Many do it because they don't trust government or because they never got caught, says Leandros Rakintzis, the auditor general of Greece.

Mr. LEANDROS RAKINTZIS (Auditor General, Greece): (Through translator) So we're never going to catch everyone. The best we can do is try to raise the percentage of tax evaders caught. I don't know any country that's managed to catch everyone.

KAKISSIS: But it's not just tax evasion that's depriving Greece of revenue. The financial crisis means Greeks are also making far less money, says Panos Tsakloglou, a professor at Athens University of Economics and Business.

Professor PANOS TSAKLOGLOU (Athens University of Economics and Business): The effects of the crisis is that we have far lower incomes. There is quite a lot of fear, and people are postponing their consumption decisions. And as a result of this, we have all this economic decline, and this economic decline is bringing in less tax revenues.

KAKISSIS: Back in Piraeus, accountant Antonis Mouzakis is busy preparing scores of tax statements ahead of this month's filing deadline. He says more than 60 percent of his clients are reporting massive drops in income. Many are facing bankruptcy.

Mr. ANTONIS MOUSAKIS (Accountant): (Speaking foreign language)

KAKISSIS: I have a client who owes hundreds of thousands of euros in taxes, he says. He wants to pay so they don't send him to jail. But he just doesn't have the money. His furniture stores are failing, and he's broke.

Mr. MOUSAKIS: (Speaking foreign language)

KAKISSIS: There are many Greeks who do pay their taxes. But many say they feel like fools for doing so. Where is their money going, they ask. They say schools and hospitals are terrible, and crime is rising.

(Soundbite of protest)

KAKISSIS: Residents in the central Athens neighborhood of Victoria recently held a protest demanding an end to what they described as immigrant crime. A 60-year-old grandmother who gives her name as Dimitra was there. She doesn't blame immigrants for the rising crime in her neighborhood. She blames the government.

DIMITRA: (Speaking foreign language)

KAKISSIS: I feel so wronged, she says. I'm a law-abiding citizen who has paid taxes my whole life, and yet I'm afraid to leave my house.

Economists say Greece faces years of recession and will need more loans. But creditors are demanding more action from the Greek government on tax evasion.

The current efforts don't seem to be working. The latest figures show that tax revenue dropped by eight percent in the first quarter of this year.

For NPR News, I'm Joanna Kakissis in Athens. Transcript provided by NPR, Copyright NPR.