In a joint operation the General Secretariat of Public Revenues, the Financial Department of Greek police and the Bank of Greece cracked down a network of suppliers of secure payment terminals (POS), offshore companies and businessmen who were using POS devices illegally thus bypassing capital controls and committing tax evasion.
Involved in the network from the part of suppliers were a company in Bulgaria with headquarters in Luxembourg and three companies in Greece that were selling the ‘fake’ POS devices.
The POS devices were not connected to a Greek bank. The banking transactions were made via Malta.
Through the bank card the customers would get together with the ‘fake’ POS device, – they were able to withdraw up to 15,000 euro per month and ‘send abroad’ up to 100,000 euro per month.
The supplier companies were found in Camatero (Piraeus), Acharnes (Athens) and Corinth (Peloponnese). The companies had sold POS devices to 917 companies in Greece and 73 to companies outside Greece.
Arrested were 24 shop- and business owners who were using these devices and taken to prosecutor for violating the Capital Controls law according to which
“Prohibited is the acceptance of contracts with payment cards if their settlement is carried out with the merchant account credit, which is kept in payment services providers outside Greece.”
State ERT TV reported of the example of a pharmacy in Chalandri suburb of Northern Athens apparently belonging to an aviation company in …Cyprus.
Authorities came after the network beginning of summer 2016, when units of Financial Crimes of Tax authorities (SDOE) made controls on the touristic islands of Mykonos, Santorini, Corfu, Samos and Herakleion, Crete as well as in Attica, Thessaloniki and Chalkidiki.
Tax authorities are to investigate whether the enterprises using these POS devices are also involved in tax evasion.
These devices are available and legal around the world but apparently not in Greece of capital controls, imposed end of June 2015.
If using such POS is legal how comes it is illegal in Greece? Capital Controls? But we are allowed to buy from foreign companies and send our precious Greek money abroad, aren’t we?
Illegal is the use of POS devices if no receipts are being issued and the business-owner avoids to pay taxes.
I wouldn’t know that having a bank account in a foreign country would be illegal…
PS something does not match in the story but I am unable to figure out what exactly.
You are not allowed to buy freely from a foreign company and transmit money abroad unless you go through the capital controls procedures.10
what? I cannot buy online form a foreign company and pay with debit card?
There is a set of rules about what can be purchased from abroad/online with Greek bank cards. It is the same for debit and credit cards. Only airline tickets are easily bought on the internet, with Greek cards. When I need to buy from ebay, Amazon, or just about any online company I cannot usually pay with my Greek cards, and have to use UK ones. As a favour, I have bought book-repair items over ebay for Greek bookseller friends, because they cannot purchase items essential for their work.
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This is why credit controls are a disaster for an economy. Producers and retailers cannot import goods in order to make their businesses work: that results in economic contraction if not collapse. Credit controls are put in place only to prevent banks in Third World countries from collapsing. That is was done in Greece recently is an international scandal and shame for the ECB, EU and the IMF: they all failed miserably, and intend to continue with their arrogant incompetence.
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And just to anticipate malakies from retired bankers here: no, it was not the choice of Tsipras and Varoufakis to impose CC. This was made inevitable by the disgraceful behaviour of the ECB and Eurogroup — who seek to evade blame and place it on Greece.
“Producers and retailers cannot import goods in order to make their businesses work:” i’ve read many times, they can do it they only have to apply to banks yet wait for approval by bank committees and it’s so time consuming. If they cannot import goods then they should have closed by now after 12+1 months of CC.
Many, many have closed – they have effectively gone bust. Others are using stocks they already had as many Greek businesses I’ve known have been very over stocked. And with others they are surviving – just – because business has contracted.
What has happened in Greece is the remorseless logic of the stupidly designed Euro. It just doesn’t work, never has nor ever can without all the other essential components like Fiscal Union, a Transfer Union and, underpinning it all, Political Union. And I have my doubts that the Euro would work even if these conditions were met simply because the economies they are trying to lash together are so diverse it really is nonsense.
Looking at the ruin of Greece and the callous indifference shown by Germany and others in the EuroZone was one of the reasons I voted recently to ‘Leave’ the EU. It is unreformable and is heading more and more in the direction of becoming an authoritarian Fascist construct.
that’s why there were thoughts to have a federal EU… because the eurosystem does not work
That could very well be the case. After all, never let a good crisis go to waste, even if they caused it themselves. The Euro was not an invention made by economists but by politicians. If it wasn’t so sad then it would be funny to see that to the problems caused by the EU, the EU proposes more EU.
A federal EU would prevent nuisances such as Brexit cause in a federation everybody should agree if somebody wants to leave. A federal EU would be a rogue capitalist version of Yugoslavia. YU did not end well as we know. Funny btw. that in the breakup of YU the rules regarding somebody leaving a federation were not honored. Also funny to see that countries that couldn’t wait to get out of YU then could not wait to give their new found sovereignty away to a bunch of unelected burocrats in Brussels.
difference betweeen EU & YU is that states would voluntarily join EU’s federation
FRY worked well for as long as Tito was alive and he stopped petty nationalism in Croatia and Serbia from ruining the project. There is in effect no difference between the Yu Federation’s behaviour and what is going on in the EU now — where countries like Hungary and Austria refuse to obey the law because they don’t feel like it. No difference at all.
Tito already started to lose control in the early seventies. The constitution of 1974 was a disaster. Later that decade he was so out of touch with reality and under influence of others he even distanced himself from his wife.
Comes along foreign intervention by for instance the BND that stiired up Croatian nationalism and the seeds of destruction were sewn.
In the post Berlin wall doctrine there was no place for socialists alternatives to rogue capitalism and all these regimes had to go. Not that I like these socialist alternatives but rogue capitalism is bad. Everybody knew that rolling up YU would be a big challenge but the good old play book of demonizing one side and victimizing others was dusted off and applied. Of course to be reapplied later in the ME.
The recent verdict of Karadzic clears Milosevic (a crook though). Buried deep in the verdict the ICTY states that he was not part of a criminal enterprise to cleanse BiH from Muslims. In fact, he warned Serb leaders in Bosnia to stop their campaigns.
Of course, that is inconvenient for the power behind the destruction of YU.
Let us not forget the role the EU (particularly Germany) played in sparking the Balkan War.
And the EU did little to stop the war, bt left it to the USA and UK to sort.
The capital controls do allow outflows for businesses purchasing goods and services imported to Greece, but they are regulated, and the profits on these purchases remain in Greece. It’s not as daunting a task as some believe.
What is “illegal” about these POS schemes is that the goods and services are purchased in Greece, but the entire proceeds of the sale go to a foreign financial institution. So, for example, you go to a merchant and it looks like you “spend your Greek money in Greece”, but the actual money transaction is taking place abroad, removing the funds immediately from the Greek banking system, which capital controls intend to regulate..
While it is not illegal, per se, to hold a foreign bank account, the current capital controls limit movement of money from Greece into foreign bank accounts, to avoid excess “capital flight”. These “illegal POS” schemes move money from Greece to foreign accounts without the transactions being regulated. That not only results in capital flight, but also make tax enforcement more difficult, as the deposits are not visible to the Greek government to compare to cash register receipts.
Lastly, these POS schemes are not “illegal elsewhere” simply because there are no capital controls “elsewhere”. However, “elsewhere” governments still face the same tax enforcement problems. But then, when did Luxembourg ever care about other nations’ tax collection problems?
thanks for the info. But what if X merchant has a shop in Greece however belonging to a Cyprus company and making trasnactions with a bank in Cy? did he have to open a bank account in GR due to capital controls?
KTG-
I’m not sure how capital controls pertain to foreign owned companies doing business in Greece, but logic states that they would be subject to the same controls for business they do for businesses based here. Thus, whatever funds they collect in Greece should be subject to capital controls, and they would have to be deposited in a Greek bank. Otherwise, such businesses could drain funds from the Greek banking system without any restraints.
The purpose of capital controls are to prevent the Greek banking system from being bled dry of money, be it by transfers out of the country or hiding it under the mattress. From what I can tell, money brought into the banking system from other countries is not as restricted as money already in the Greek banking system. My bank account statement shows the limits on my withdrawals and transfers are higher than the 420 Euro/week, as all the funds in it are deposits of my pension from outside Greece. What I would spend 420 Euro/week on still escapes me. And, of course, bank transfers to banks within Greece (pay bills or give to someone) are also unlimited, as the money involved does not leave the Greek banking system.
As I noted above, the only logical reason for using a foreign based POS system would be to evade taxes or avoid capital control limits. And, now that I think of it, if the money is collected in another country using these POS schemes, one could then transfer it back to a Greek bank and have it seen as “foreign source funds” not subject to capital controls, much like the case with my pension.
P.S.
The very fact that banks in good old Juncker’s home country of Luxembourg are involved makes it smell as rotten as fish left in the open for a week during July.
I see. I think the problem with this POS case is that not all details were given to the press initially. Today, I heard that some shop-owners used POS A for Greek customers and POS B – probably the illegal -for foreigners.
Live fast – die young, if time is running out and you wanna buy lots of Frank Zappa albums and a decent needle to play them the 420 are fast gone, just like for any medicine. And then you may figure, oh records went cheap as shit, need more …
Yes. And probably he would not have been allowed to do so (as no new accounts could be opened) so would either close the business or operate illegally. This is the mess that Greece is in.
Lawyers funny job to point out that capital controls are against EU-free-market rules.
Yes, it’s all very well to talk about CC as stopping flight of capital from Greek banks, but in this case it is about using the CC rules to stop Greek businesses from using banks based in another EU country for their transactions. In other words, they are not protecting the Greek banks’ holdings: they are trying to ensure that all transactions in Greece go into Greek banks. This is a complete refutation of the principles of the EU’s Single Market — as indeed are capital controls.
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As for proper accounting for taxation purposes, this should be very easy by making a formal arrangement with the tax authorities, and anyone who does not is committing a criminal offence. However, I am 100% sure that even prior to CC the Greek tax authorities would not have accepted businesses conducting transactions in this way — even though they were legal prior to the imposition of CC.
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Basically, Greece needs to get back into the real world of 2016 instead of pretending that it is 1920. Free movement of capital is a fact of life, and Greece has a very undesirable but temporary exemption from it. The longer this mess with CC goes on, the more likely it is that Greece will exit the eurozone if not the EU. Blaming rational businesses for this mess is typical of politicians and bureaucrats: the fact is that they were trying to make their businesses work. I see no evidence that Tsipras is interested in doing the same…