Galery

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The state announced suspension of payments and froze tax refunds. At the same time, the amounts due to suppliers have reached €4.4 billion. The situation is much worse than ever before. It is a prevailing assumption that the more time passes without an agreement with the creditors (which would unblock the financing to the Greek economy), the situation can only deteriorate further.

This throws markets into despair. A chain reaction of deferred payments has been created among private companies. Dozens of projects – in road, rail and port construction, water and sanitation, health, etc. – are hanging in the air due to suspended payments by the state.

Pension funds are in the same bind as their managements are in the grip of financial drought. Over the next few days, they must find €2.3 billion for the 29 May-2 June pension disbursements. However, the Treasury will be struggling to scramble €900 million to hand over to the Ministry of Employment. The rest of it will probably be mustered one way or another (from loans, debt settlement and social security contributions). According to the audit office, pension funds are collapsing for the significant drain on revenues and government funding. It is quite telling that they had a deficit of €349 million in the first quarter (against a surplus of €798 million in the same quarter last year).

At the same time, the country’s arrears have swollen beyond €4.4 billion, because of the internal suspension of payments. But the State's debt in fact stands much higher than that: the above figure does not include the arrears of the last 90 days - a period of further sinking of the economy. 90 days after having fallen due any debt is counted as arrears. According to ministry of finance official data, the state owes to suppliers the following amounts:

• Direct liabilities of the ministries - €274 million

• Liabilities of local government - €319 million  

• Liabilities of the insurance funds - €2.008 billion  

• Hospitals’ debt - €903 million  

• Liabilities of legal entities - €237 million  

• Outstanding tax recovery - €688 million  

These data show that the market was loaded with a further €717 million in the first quarter compared to the end of 2014. According to reports, the percentage of bad debts that companies in Greece each year are forced to scratch out currently stands at around 10% of their annual volumes, while the same indicator does not exceed 3% overseas.

VAT recovery

On top of the default on state liabilities to businesses, VAT refunding suffers enormous delays, which further puts businesses on their knees. As a result, companies become creditors to the state for no fault of their own, and at the same time cannot pay their salaries.

VAT refund delays reach four years, as shown by the data. Tax authorities claim they were instructed by the ministry of finance to suspend refunds so that revenues can be channelled into salaries and pensions.

According to the chief revenue office of the ministry of finance, Egio’s tax office takes 1,420 days on the average for VAT refunds. At the centre for control of large companies, the average VAT refund time is 1,114 days. That is, 57 large companies wait longer than three years.

As evident, legal provisions are only applied at the government's whim. According to the VAT refund ordinance, the process must take 90 days. An interest should be charged thereafter.

This phenomenon is not restricted to Egio or big business. In 88 out of 113 tax offices in the country, VAT refunds take longer than 90 days.