Thursday, August 12, 2010

Tax from the front lines in Greece

In March of this year Greek Prime Minister George Papandreou said:

"To give you just one measure of the scope of that problem: Fewer than 5,000 Greeks declare incomes of EUR100,000 or more," he said. "And that pattern must end, and it will end.

Now, courtesy of Reuters, here is a very fine story looking at the new Greek fight against tax evasion, from an insiders' perspective.

According to Eurostat, when you exclude social security contributions Greece has the lowest tax revenue-to-GDP ratio in the euro zone, at 20.4 percent. The black market makes up close to a third of the country's 240 billion euro economy, compared with 27 percent in Italy and 15 percent in Germany, according to the most recent estimates by the World Bank.

Now, as part of its 110 billion euro rescue deal with the European Union 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 9 billion euros a year, equivalent to 3.8 percent of its GDP, or more than a third of the sum Athens has pledged to lop off its budget deficit over the next four years.

But it's not just about finance. 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 told a conference on the island of Crete on July 30. "To turn the crisis into an opportunity for changes that have been needed for decades."

Read on. And apologies for the thin posts of late. It is the holiday season.


Post a Comment

<< Home