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Supervisors report a total failure in the fight against tax evasion

28 February 2013 / 15:02:25  GRReporter
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The Greek tax collection system continues to be slow and inefficient, which is causing serious problems for the treasury and the implementation of the budget as stated in a summary report of the International Monetary Fund and the European Commission.

According to the experts, the controlling authorities have failed to restrict tax evasion and to make those Greeks with overdue payments to the funds make them as quickly as possible.

One of their key recommendations is to change the status of the General Directorate for State Revenue. The experts believe that the service should be established as an autonomous institution in order to minimize political intervention and corruption.

Indicative is the case of 130 public workers who have exported amounts to foreign banks and the controlling authorities are currently investigating the origin of this money. According to the supervisory Troika, "in order for the inspections to be effective, they need to be followed by disciplinary actions and dismissals".

The experts from the technical groups of the supervisors argue that if the service in charge of the tax collection continues to act in the same way, the budget targets are unlikely to be met.

In their opinion, the reforms are being implemented slowly and only partially and important links in the chain of the tax system suffer from a lack of staff. In addition, the new inspectors are not familiar enough with the work whereas the general secretary in charge of government revenue is dependent on the political leadership of the Ministry of Finance.
The situation in the anti-financial crime service is similar and the majority of inspectors responsible for large taxpayers do not have workplaces and laptops.

One out of every two inspectors is over the age of 50 and one in four is over 55 years old. The Troika reports that the salaries of newly appointed inspectors are under 700 euro and that only 20% of them are being paid more than the minimum salary in the country.

Only 25% of the regular checks carried out last year took place in large companies and only 38% of the targeted checks were on persons with a very large property or freelancers with high incomes.

The Troika’s forecasts for the success in collecting the delayed payments are extremely disappointing taking into account the objectives the financial institution has set for 2013. The Memorandum states that the tax authorities should collect 1.9 billion euro from old and unpaid taxes in the same year while the domestic forecasts of the Ministry of Finance have reduced this amount to 1.176 billion euro.

At the same time, the supervisors as well as the tax authorities are aware that the majority of these amounts will not be repaid, because most of them are related to obligations of bankrupt companies, public enterprises and large fines disproportionate to the actual violations.

On the other hand, the arbitrary system established in May 2011 for resolving tax issues is not yet operating leading to 113,630 pending cases in the courts.

The experts from the International Monetary Fund and the European Commission carried out the inspections in January this year. The main recommendations for the Greek government are:

- to increase the number of criminal persecutions in connection with tax evasion

- to write off those old unpaid taxes, which are unlikely to be paid according to them

- to appoint 200 new inspectors with experience in the private sector

- the new General Directorate of State Revenue should not be subordinated to the Ministry of Finance and it should control the anti-financial crime service and the General Directorate for Information Systems

- to suspend any new agreements on the gradual payment of obligations and to eliminate the tax amnesty

The experts suggest that a much more independent tax office should be created, which will have to start operating in March 2014.

The Troika also suggests that inspections of companies and individuals should be carried out depending on the specifics of each case and that the inspectors should focus their efforts on the most profitable cases. According to the experts, the service responsible for the big debtors must turn its attention to 1,500 of the highest tax obligations, which are considered receivable. These include individuals and companies each of which owes at least 600 thousand euro. The total amount of these obligations of irregular taxpayers in this category is 5.5 billion euro.

Another recommendation of the representatives of Greek lenders is that the results of the inspections should be closely monitored and that the criteria for the selection of the objects of inspections should be changed, particularly with regard to freelancers such as doctors and lawyers.

The state, in turn, is a bad payer too, which is posing problems to the companies. According to the report of the experts, the tax authorities do not refund the VAT to companies and individuals, which is threatening their survival. The specific companies are forced to pay the VAT in advance and therefore, they are in a less competitive position than foreign firms are.

"The right of taxpayers to VAT refunding is covered by a limitation period after three years and a half. Then, either a full tax audit should be carried out or the taxpayer must turn to the court to get his money back. But the state should be "punished" instead of him for not refunding on time the VAT withheld," states the critical report of the experts.

Tags: EconomyTax evasionInspectionsInternational Monetary FundEuropean CommissionReport
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