...while the tax evaders get violent
Greece Warns of Going Broke as Tax Proceeds Dry Up
Nikos Maitos investigates tax evasion. He said one business owner attacked him with a whip.
Eini Vourloumis for The International Herald Tribune
By LIZ ALDERMAN
Published: June 5, 2012
As European leaders grapple with how to preserve their monetary union, Greece is rapidly running out of money.
Government coffers could be empty as soon as July, shortly after this month’s pivotal elections. In the worst case, Athens might have to temporarily stop paying for salaries and pensions, along with imports of fuel, food and pharmaceuticals.
Officials, scrambling for solutions, have considered dipping into funds that are supposed to be for Greece’s troubled banks. Some are even suggesting doling out i.o.u.’s.
Greek leaders said that despite their latest bailout of 130 billion euros, or $161.7 billion, they face a shortfall of 1.7 billion euros because tax revenue and other sources of potential income are drying up. A wrenching recession and harsh budget cuts have left businesses and individuals with less and less to give for taxes — and growing incentive to avoid paying what they owe.
The budget gap is widening as the so-called troika of lenders — the International Monetary Fund, the European Central Bank and the European Commission — withholds 1 billion euros in bailout money earmarked for government financing while it waits to see whether new leaders elected June 17 will honor Greece’s commitments.
Even if the troika delivers that money, Greece will struggle to cover its obligations. It underscored a harsh reality that is playing out in other troubled euro zone economies.
Prolonged austerity is making it harder, not easier, for governments like Greece to become self-reliant again.
A top Spanish official acknowledged on Tuesday that Spain could not readily return to the markets to raise money because investors are demanding such high rates, highlighting how the debt crisis is spreading to larger economies in Europe.
Chancellor Angela Merkel of Germany said a day earlier that European leaders needed to find a way to create the political union that the world is looking for to complement their monetary union. European officials took a small step in that direction Tuesday by proposing a central authority for banking regulation, which would require countries to give up a bit of cherished sovereignty.
An essential element of Greece’s recovery plan has been to collect more taxes from a population that has long engaged in tax avoidance. The government is owed 45 billion euros in back taxes, tax officials in Athens said, only a fraction of which will ever be recovered.
To understand the difficulty, just talk to Nikos Maitos, a longtime official in Greece’s financial crimes investigation unit.
When he and a team of inspectors recently prowled the recession-hit island of Naxos for tax evaders, a local radio station broadcast his license plate number to warn residents.
“One repercussion of the crisis is that people are harder to find,” Mr. Maitos, an imposing, burly man, said last week in his sweltering office on the edge of Athens. “And when you do find them, they don’t have money.”
Even tax collectors, who have had to take large pay cuts, find that budget reductions make it hard to pay for the gasoline needed to reach their targets.
“After two and a half years of austerity, it’s really a difficult time to bring in revenue,” said Harry Theoharis, a senior official in the Greek Finance Ministry who helps oversee the country’s tax payment system. “You can’t keep flogging a dead horse.”
Salaries and pensions in the private and the public sectors have been cut by up to 50 percent, leaving Greece 495 million euros short of its revenue targets in the four months ended in April, according to the Greek Finance Ministry. With less cash, consumers have curbed spending, leading thousands of taxpaying businesses to fail.
Income expected from a higher, 23 percent value-added tax required by the bailout agreement has fallen short by around 800 million euros in the first four months of 2012. That is partly because cash-short businesses that were once law-abiding have started hiding money to stay afloat, tax officials said.
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