Greece Releases the Tax Inspectors
- Jul 30, 2015 | Gail Cole
Let the crackdown on tax evasion begin.
Tax evasion is a way of life for many in Greece. It’s a well-known problem—the benefits of tax evasion are high and the costs are low. Historically, it has gone relatively unchecked. Not anymore.
Value added tax (VAT) rate increases took effect last week, and the “crackdown on tax evasion” promised by Prime Minister Alexis Tsipras is now officially underway. No business will go unexamined, at least not in prime holiday spots. As explained by Deputy Finance Minister Trifon Alexiadis, “We will start in the expensive destinations, the luxurious hotels and we will go even to the smallest taverna.”
The efforts of the ministry’s Financial Crimes Squad are sure to be rewarded. During spot checks last weekend, tax violations were discovered in almost one in four businesses. Certainly they are needed. In a recent report on Greece, the OECD noted the following:
“Tax evasion is widespread, hampering an effective revenue collection and raising social concerns about an unfairly distributed of (sic) tax burden…. Recommendations: Enhance the efficiency of tax collection. Improve the effectiveness of audits through better cross-checking procedures. Speed up court proceedings in order to strengthen enforcement.”
For the moment, the Financial Crimes Squad is targeting holiday destinations because many of the recent VAT changes center on the tourism industry. “Under the terms of Greece’s third bailout program, VAT rates have been raised on Aegean island hotels and restaurants” (Ekathimerini.com). As the crackdown continues and the battle against tax evasion expands, Greek tax authorities may receive reinforcements from Tax Inspectors Without Borders.
Fight or Flight
Meanwhile, Greeks are fleeing Greece and its capital controls. According to the National Confederation of Hellenic Commerce, “60,000 companies have submitted requests to move their headquarters to Bulgaria.” They’re not simply distancing themselves from Greece’s well-publicized gloomy economy; businesses are being drawn by lower wage costs, the favorable business climate, and the mere 10% taxation on businesses and individuals offered in Bulgaria (Greek Reporter).