Greeks observe preelection ritual of tax dodging

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While Europeans breathlessly wait to see if Greece can seat a government, get its fiscal act together and commit to staying in the euro currency club, some citizens of the heavily indebted Balkan state have been engaging in a time-honored tradition ahead of their June 17 election: tax evasion.

Greek media report that interim Finance Minister Giorgios Zanias called tax collectors on the carpet recently and ordered them to target the most egregious evaders to prevent a worsening of the risk that state coffers will run dry by the end of this month. The reports alluded to about $56 billion in uncollected taxes.

On the same day that Zanias pressured tax authorities to step up collections, the Kathimerini newspaper of Athens reported that Greek police had arrested 500 of the worst offenders who collectively owe $844 million.

According to a study published last year by the Athens University of Economics and Business, tax-dodging ahead of elections goes back as far as the modern democratic ritual of voting itself, reestablished after the end of military dictatorship in 1974. Two economic scholars, including a former finance minister, who reviewed tax records for the months preceding 13 national elections found a marked drop in taxpayer compliance when government officials are focused on political campaigns and fewer audits are carried out.

‘May has been a particularly bad month for state revenues as in the first 20 days of the month, which included a general election, the inflow to public coffers was at least 20% lower than in the same period last year,’ Athens’ Kathimerini reported last week, calculating the shortfall at more than $1.6 billion.

The newspaper noted that without better collections, Greece may soon run out of money for salaries and pensions and would fail to meet budget-cutting and revenue targets needed to get further cash infusions from the Eurozone bailout fund. Horst Reichenbach, head of the European Union Task Force on Greece, has estimated uncollected taxes in Greece as high as $81 billion, and said in March that almost $10 billion of that could be easily collected. Much of the rest, he and others note, is tied up in more than 160,000 legal challenges that take Greek courts seven to 10 years to resolve on average.

Greece is supposed to come up with at least $13.7 billion this month to reduce its deficits, a condition unlikely to be met given the absence of an elected government and the June 17 election in which anti-austerity politicians are ascendant. Athens was assured it will get the $5.2 billion by the end of this month needed to pay down its debts with the European Central Bank, but access to an additional $1.2 billion depends on the state of the country’s finances and compliance with the deficit-reduction demands.

The disclosures on uncollected taxes followed by just a few days an outcry by affronted Greeks over International Monetary Fund chief Christine Lagarde’s comment to Britain’s Guardian that her thoughts turn in these times of continental financial crisis to ‘all these people in Greece who are trying to escape tax.’

Lagarde has since apologized for the remark. However, many Europeans commenting on media accounts of the dust-up have pointed to the persistent problem of Greece’s ‘shadow economy,’ the roughly 27.5% of commerce conducted outside the reach of the tax collectors.

In what appeared to be a move to encourage tax cheats to rethink their behavior, the Finance Ministry has extended the deadline for personal income tax filing from June 15 to June 30. The caretaker officials who have been running Greece since its inconclusive May 6 election have hinted that they may push the filing date back further, to mid-July, when Athens presumably will have an elected government again and tax collectors can turn their attention back to their jobs.

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--Carol J. Williams in Los Angeles