The European Union and International Monetary Fund, who, along with the European Central Bank, make up Greece’s Troika of lenders of last resort, have issued a report damning the country’s tax collection system as broken.
To indicate the size of the problem, the report takes the example of “big business tax collection office.” an office created specifically to monitor big businesses and higher incomes in Greece. The new tax office has not yet hired staff, does not have computers or any other equipment and is not operating.
The Troika is is pushing the Greek government to fight tax evasion but has mostly been ignored. Reports published by the IMF on corruption argue that and tax evasion is 10% of the Gross Domestic Product (GDP) and urges the government to take action against big tax evaders in order to avoid a new round of cuts and tax hikes.
The report also noted that tax collection efforts fell flat in 2012 while the government went after workers, pensioners and the poor instead because they were easy targets. In 2012 the government had set the goal of collecting two billion euros ($2.4 billion) but collected less than half of it, Euractiv reported.
The problem, it was noted, is that politicians interfere with collection efforts to protect their friends and that tax offices are understaffed despite successive governments over the years packing public payrolls with hundreds of thousands of needless workers in return for votes, a vote-rigging practice unlawful in many countries.
The report said the tax system is unfair, unequal and plays favorites. Business is taxed at only 10% while they not obliged to share their dividends every year. Businessmen usually take the dividends, which are taxed with 26% without declaring it to the tax man, getting away only with a 10% tax.
The magazine Unfollow recently published the tax declarations of four of the richest Greeks where they declared incomes less than the median, using legal loopholes. According to statistics, businesses pay only a small amount of the taxes, almost 5% while workers and employees pay vastly higher rates.