Guest Post: Greece’s Tax Road to Nowhere…

 How many taxes fall on a single Greek property? According to some more than ten, other claim up to 20. Let me count for you the easy ones. An owner of a single property in Greek territory has to pay 1) Property tax 2) ETAK = something like Cohesive Property Fee 3) Big Assets Tax 4) Tax in case of sale 5) Tax in case of  inheritage 6) Tax in case of parents giving the property to children 7) Extraordinary Property Levy. In the case of the Property Levy that shakes the society with outrage is being imposed although the ETAK bill for 2009 and 2010 have not been sent yet to the property owners. The state had calculated to collect 1.5 billion euro from ETAK. Why these tax hasn’t collect yet? “Bureaucratic obstacles” I read in the Greek press today.

Fine! According to latest information these two ETAK will be sent as soon as possible. Most probably soon after the property Levy bills….  At the same time, Finance Minister Evangelos Venizelos announces the value increase of the properties and new value zones schema. Already in 2011, the government decrease the tax free amount for the so-called “first residence” from €400,000 down to €200,000. Within one night the property taxes rose. The same will happen with the property values. Just to collect for more taxes through the property levy taxes for the year 2012.

At the same time, they forced property owners to economically ‘put in order’ the so-called ‘semi-open spaces’ in their properties – but not to ‘legalize’ them.. It has been a common legal/illegal practice with the cooperation of constructors and Housing authorities turning a blind eye, to close more space than allowed in the construction license. Those owners had to pay at least 1.500 euro in 2011, so they can ‘put in order’ their properties … no, not for ever, but for just 40 years!

Now there is a new draft bill on the making addressing the owners whose property is ‘deliberate’. To make the term short, property that has been built without proper construction license. No, don’t think of favellas or gececondu-lile buildings. We’re talking here about whole settlements build ‘delibarately’. With roads, electricity, water and state company telephone lines. Those owners will be obliged to pay even 15,000 euro.

As far as I can quickly calculate, a property owner will be obliged to buy his property a new… This is a road to nowhere, folks!

Below, read the Greek Tax Insanity as submitted by Cheshire Cat:

Greece continues on its road to serfdom. The latest desperate tax, the ‘property’ tax, obliges those to pay if electricity bill is in their name, is a feudal tax on the space we live. For many poor Greeks, who struggle to pass this bill on to their landlord, the lights will go out.

How much revenue will such taxes raise? Taxes not based on the ability to pay are self defeating – even Adam Smith’s (1723-90) knew this.  We have seen austerity measures reduce GDP, savage the tax base, destroy small businesses, reduce overall tax receipts, miss budget targets and calls for more rounds this austerity spiral. Increasing taxes while reducing everybody’s ability to pay them will eventually lead to a breakdown in the tax system.

Even the new tax on eating out might fail to increase tax revenues. If Greeks’ appetite for eating out falls (%) more than the increase (%) in tax, then tax revenues will fall. Add to this the number of restaurants that will close down, or refuse to pay, and it is easy to see how this particular tax target will be missed.

These taxes only exist to buy time for the Troika. It cannot get the Greek economy out off its downward spiral of austerity.   This insane policy, applied repeatedly to Greece for 18 months, is now being applied to all Euro budget deficit countries. Europeans are still failing to under the causes.  Government budget deficits are the symptom not the cause.

Spain and Ireland were running a budget surplus, unlike Germany, before the market meltdown in 2008.  Ireland damaged its finances by deciding to bail its banking sector and in Spain a massive property bubble burst. This was brought about by a global crisis and a faulty Euro. What the various PIIGS economies do have in common are unsustainable trading deficits with their Euro partners and no tools (exchange rates or a monetary policy) to restore competitiveness and correct trading imbalances between members.  The euro is built on a fault line.

Greece has been trapped by the vulnerability of the German and French banks and a failure of European leadership. It faces mass destruction and needs to force the issue by saying it is not going to borrow more money that it simply can’t pay it back. If the pilots can’t stop this euro flight to hell, the passengers will at some point say ‘lets roll’ and take over the cockpit.