Sunday, May 2, 2010

The Taxman Cometh. The Taxed Man Avoideth

The Times reports on the heroic level of tax avoidance in Greece. There's a lot of talk about the "cultural tradition" of bribes and tax cheating that has greased (heh heh) the wheels in that country, but the practical reality is there are a lot of Greek entrepreneurs and professionals who don't feel like paying for barbers to retire at age 50, and for garbagemen to go on strike just in time for summer vacation: Greek Wealth Is Everywhere, But On Tax Forms

Various studies, including one by the Federation of Greek Industries last year, have estimated that the government may be losing as much as $30 billion a year to tax evasion — a figure that would have gone a long way to solving its debt problems.

“We need to grow up,” said Ioannis Plakopoulos, who like all owners of newspaper stands will have to give receipts and start using a cash register under the new tax laws passed last month. “We need to learn not to cheat or to let others cheat.”

On the eve of an International Monetary Fund bailout deal that is sure to call for deep sacrifices here, including harsh austerity measures, layoffs and steep tax increases, many Greeks say they feel chastened by the financial crisis that has pushed the country to the edge of bankruptcy.

But even so, changing things will not be easy. Experts point out that ducking taxes is part of a broader culture of bribery and corruption that is deeply entrenched.

Mr. Plakopoulos, who supports most of the government’s new efforts, admits that he and his friends used to chuckle over the best ways to avoid taxes.

To get more attentive care in the country’s national health system, Greeks routinely pay doctors cash on the side, a practice known as “fakelaki,” Greek for little envelope. And bribing government officials to grease the wheels of bureaucracy is so standard that people know the rates. They say, for instance, that 300 euros, about $400, will get you an emission inspection sticker.

The government estimates that it may be losing up to $30 billion per year, which is a huge shortfall for a country of just 11 million. But, Greece is being bailed out to the tune of $120 billion, so even if everyone turned into Honest Ioannis overnight, there would still be a an unsustainable welfare state in need of a bailout.

The problem is not with the greedy "rich." It is with the tax collectors and redistributionists who have simply tapped out the golden goose on behalf of their rioting constituencies. It's fine to speak of social justice and equality, but the one lesson no one ever learns is that eventually you really do run out of other people's money.

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