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Greece once again made the front pages of international media after the new list of reforms Yannis Varoufakis forwarded to Jeroen Dijsselbloem was leaked. Most striking in it is the finance minister’s proposal to deploy ‘undercover agents’ who will investigate cases of tax evasion.

How will the "undercover agents" work?

According to what the minister describes, the "agents" will receive an hourly wage and be put on two-month contracts. They will hail from different walks of life, e.g. undergraduates, housewives, or even tourists in areas where tax evasion is rampant.

The term Varoufakis uses to describe this spectacular VAT police is Onlookers’ VAT Evasion-Fighting Scheme.

"Amateur investigators will be appointed for a strictly limited period (not more than 2 months), with no possibility of extension. After a basic training, they will masquerade as customers on behalf of the tax authorities, equipped with video and audio recording devices," the minister explained. According to Varoufakis, even by itself, the news that there are thousands of ‘undercover agents’ in many parts of the country, wearing recording devices, will radically change the behaviour of taxpayers and will lead to the desired results in the fastest conceivable way.

What do experts say about Varoufakis’ idea?

The first reaction on behalf of experienced auditors is rather cool. They argue that such a policy, styled after the US tax police, will be ineffective in Greece.

In fact, this measure emulates, or at least tries to, the Whistleblower Office of the US Inland Revenue Service. As is well known, the latter is able to scare into compliance even the mightiest corporations.

The so-called whistleblowers, who help detect cases of tax evasion, receive bonuses, which can reach up to 30% of the taxes or fines paid by offenders.

Could something like this be pulled off in Greece? Hardly, because both the taxation legal framework and the system of tax inspections are unlike the US ones. The Greek system does not have those ‘safety valves’ like the US one does, which can secure tax evasion scaring tactics and make them really scary.

Disagreement even inside the ministry of finance

Even senior representatives of the ministry of finance have qualified the idea of assigning control duties to such undercover Rambos as controversial. Apart from the obvious risk of arbitrariness, there is also the potential of fostering collusion between amateur auditors and tax dodgers without the safety mechanisms preventing such forms of corruption.

Experienced auditors argue that the huge fines now imposed for failure to print cash receipts are not the right solution as they are never actually enforced. It is quite telling that arrears amounting to € 25 billion have been accumulated only from fines. What auditors think should be done is to impose small and collectable (e.g. € 1,000) fines during on-the-spot checks, and then dig further into the perpetrator’s income and VAT issues.

The reaction of the Europeans

There has been no official reaction from Europe yet, but the proposal does not seem to trigger too much enthusiasm.

As the Financial Times points out, responses to the plan for instituting tourist-agents have portrayed it as something slightly humorous, and this is a clear sign of the growing gap between the Greek government and the country's creditors.

What Brussels is interested in is the bigger picture, which is why the European representatives have indicated that commitments alone are not enough.

The Eurogroup would reportedly prefer to see some legal amendments rather than a list of proposals for reform.

Sharp response from PASOK and New Democracy

The first reaction to Varoufakis’ list came from PASOK. The party headquarters did not mince their words and qualified the proposals as ‘ridiculous and contradictory’.

New Democracy said that the government ‘called meat fish and lied.’