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Victoria Mindova

Proposals for changes in tax legislation have confused the public completely. The Finance Minister George Papakonstantinou was accused last year that he had made the public dialogue on tax reform legislation a public monologue. Therefore, this year he invited all social partners in the ministry to take part in a "constructive" dialogue before introducing the final text of the bill for a vote. After a four-hour hearing of the views of different parties in the public dialogue the situation was like in the fable about the eagle, cancer and pike.
 
The Finance Minister opened the meeting making it clear he would like the most stringent penalties to be introduced for all tax offenses. He wanted all long-term violations of tax legislation to be deemed criminal. "If a citizen or company has declared the minimum taxable income in the last ten years and if we find their bank accounts and find millions the penalty should be prison," said the Minister briefly.

There was a positive response in the society to all these plans but it turned out that their implementation in practice would be very difficult. Commercial and industrial chambers raised the issue of VAT return delays which in some cases last two years. Their representatives stressed that if the government wanted to impose strict measures and apply the fast-track to companies and employees of free professions for non-payment of tax liabilities, it should first take care to return the business the due amounts on time.

The National Confederation of Hellenic Commerce, the Union of Industrialists and the Federation of Greek Exporters supported this view and stressed that in times of recession the market was extremely limited and there was no cash. The issue of worthless checks which flooded the market last year was raised at the meeting. The worthless checks that were put in circulation caused a loss of one billion euro and ruined thousands of small and large companies in 2010. Many businessmen found themselves with mountains of worthless checks in their hands and outstanding payments to the state, stressed manufacturers and traders. They insisted the Ministry to take into account that the lack of liquidity did not make them criminals.
 
"If six out of ten companies pay their tax liabilities regularly the new measures will punish the remaining 40 per cent operating legally and paying their taxes," said Vassilis Korkidis, president of National Confederation of Hellenic Commerce. He urged the articles in the bill concerning the criminal proceedings, the groups of offenders and the conditions for their application to be considered very carefully.  

The manner and quality of assessment of tax officials were also discussed. A large number of employers' organizations insisted that the Ministry of Finance should screen the tax employees and guarantee their independence and objectivity before allowing them to impose fines or more severe penalties.  

The president of the Chamber of merchants and craftsmen Dimitris Asimakopoulos urged the ministry not to declare all tax irregularities criminal but to find ways to prevent them. He stressed that the Greeks were clever and the more stringent the measures, the more the workarounds found.

A new department within the Ministry was proposed to be established which would be directly connected with the local business and would keep an open dialogue on topics related to the proper bookkeeping and tax fairness. The organization of authorized accountants or in short authorized auditors welcomed this proposal and stressed the need of better communication between the government and the business. According to them, this would result in more fair payers and more taxes collected in the state treasury.

The other issue discussed was the high taxation of retained earnings, which in Greece is 25%. Business representatives offered its decrease by at least 5%. Otherwise, Greece would risk to loose serious foreign investments in the local market. They also called for tax incentives to make the entrepreneurs re-invest their profits. The president of the union of property dealers Ioannis Revitis gave Bulgaria as an example of a stable and efficient tax system as it offers a flat tax of 10%; it is attractive for investment and has developed good business climate.

His proposal was taken ironically both by the Ministers and some of the representatives of the social partners. Ioannis Revitis left the hall seemingly slightly angry. After half an hour the Finance Minister himself apologized that he should hurry up to the parliament and left the business and trade unions proposals hearing.