Greece’s Coffers Are Empty As Taxes and Insurance Contributions Dry Up

 A new black hole of 600 million euro has been opened in the Greek state budget due to the political uncertainty – or even say: lack of governance – between the May 6 and June 17 elections. Then no matter how severe the situation is, Greek state mechanisms have a tendency to ‘relax’ before the elections. Do not ask me why… I do not know and I do not understand…

In May the Greek state “missed” the target to collect revenues of more than 200 million euro from the Property Fees. That was due because the relevant decision was postponed and was left to the nexct government to decide.  

At the same time, the extension of submitting income tax declarations to July 17 adds to loss of state revenues. Until today, only 10% of taxpayers (less than 500K out of 5.5 million people) have submitted their income tax declarations.

Daily Proto Thema reports on its website that the black hole in May was 600 million euro and that until the end of the year the shortfall would be 1.3 billion euro. 

In an article about the empty coffers of the Greek state, the New York Times quotes several government officials who explain the reasons why Athens is unable to get life-saving revenues:

Below some excerpts from NTY: Greece Warns of Goiong Broke as Taxes Dry Up

 Greece is rapidly running out of money. Nikos Lekkas, a government official, said banks had hindered his efforts to collect back taxes, according to New York Times.

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.
…..

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.

Greece’s General Accounting Office said recently that the state collected 25 percent less revenue in May than it did a year earlier. And the state has had to slash its goal of raising 50 billion euros from privatizations to just 3 billion euros as foreign investors lose interest.

That has left a caretaker government scrambling for a Plan B. One thought is to take billions of euros reserved for recapitalizing Greek banks, which have suffered from a flight of deposits amid political uncertainty and fears that Greece may abandon the euro for its own currency.

…
Tax collectors got another potential lift recently when the government started enforcing a 1995 law that gives them access to bank accounts of suspected tax evaders.

But Nikos Lekkas, a top official at the financial crimes agency where Mr. Maitos works, said Greek banks had obstructed nearly 5,000 requests for account data since 2010.

“The banks delay sending the information for 8 to 12 months,” he said. “And when they do, they send huge stacks of documents to make it confusing. By the time we can follow up, much of the money has already fled.”

In the past two years, the agency managed to assess back taxes worth 650 million euros on 210 of the cases, he said. But only 65 percent could be collected.

One challenge lies in what Mr. Lekkas calls the big fish — 18,300 offshore businesses belonging to wealthy Greek individuals and companies. Authorities are trying to trace the owners through property records, and they recently seized several large properties linked to offshore companies whose owners owe tens of millions of euros to the state.

That leaves collectors having to go after mostly smaller tax evaders, often with mixed results.

During a surveillance trip on the resort island of Santorini, Mr. Maitos said he and two colleagues observed a gas station owner insisting on cash-only transactions to avoid declaring taxes. When confronted, the man lashed at them with a bullwhip while cursing the state for taking his money.

Officials said things might improve drastically once Greece’s entire tax system is computerized, a move that is supposed to be completed by the end of this year.

Charalambos Nikolakopoulos, the head of the Greek tax collectors’ union, said there was no need for outsiders to straighten things out.

“Yes, we need change,” Mr. Nikolakopoulos said. “But things will only improve in Greece when we get a stable government that will impose its political will.”

As the Greek political will is so damned bound to the financial elite of this country, I would know how this systemic errors could be overcome.

Greece’s biggest insurance fund IKA  has a black hole of 1.4 billion euro due to the rise of unemployment, threatening the payment of pensions in July and the health-care of  1.2 million employees.

At the same time, caretaker Health Minister Christos Kittas struggles to halt the collapse of the unified health-care system EOPPY and the troubles of millions of insurers by paying 400 million euro  of outstanding debts to pharmacists and hospital suppliers.

PS And if we do not die, we will  to experience all the five acts of the Greek tragedy…