Greek Tax Revenues

According to ELSTAT, total tax revenues for 2013 were 83 BEUR (page 18 of this Economic Bulletin). Since the state records revenues on a cash basis (instead of an accrual basis), these are not all taxes due but only that portion which was actually collected. Interesting questions pop up when comparing this figure to the data compiled in this Macropolis article.

At December 31, 2013, after the state had collected the above 83 BEUR, there were still another 61 BEUR in taxes due to the state but not paid by the respective tax payers. This is referred to as 'legacy'. Put differently, had the state been able to collect all of the 'legacy' in 2013, tax revenues would almost have been twice as high as they actually were.

The word 'legacy' suggests that there was a one-time problem in the past which may or may not be cured going forward but since it is a one-time problem, it will not become greater. This is not the case here. Instead, from January-August of 2014, taxes due but not collected were 9 BEUR. Thus, the 'legacy' of 61 BEUR at December 31, 2013 became a 'legacy' of 70 BEUR by the end of August. Over 1 BEUR per month on average was the amount of taxes due but not paid so far this year.

Of the 2013 'legacy' of 61 BEUR, roughly 1 BEUR could be collected during the first half of 2014. That looks like a lot of money but it represents a collection rate of only 1,6%. The government hopes to collect another 1 BEUR of the 2013 'legacy' in the second half of 2014 which will bring the annual collection rate to 3,2%. At the same time, at least 12 BEUR will be added as 'new legacy' during 2014.

This has the characteristics of moving one step forward while retreating two steps at the same time: 2 BEUR of old debt is collected while 12 BEUR becomes new 'old debt' as the year goes on. On a net basis, 'legacy' will increase by 10 BEUR during 2014.

When debtors don't pay their obligations, there are always two questions to be asked: is it their unwillingness to pay or is it their inability to pay?

When tax payers could pay their taxes but are unwilling to do so, the full force of the judicial and executive should come down upon them. When tax payers don't pay their taxes because they are unable to pay, no judicial or executive is strong enough to make them pay. That would be like attempting to draw water from a dried-out well.

Who are those culprits who don't pay the taxes due? It can't be the receivers of wages/salaries or pensions because there the income taxes are withheld at the source. My understanding is that this group accounts for roughly one-half of the Greek tax subjects.

I can only guess that the culprits are those who have tax obligations as a result of deemed/assessed income or tax obligations stemming from non-income items (real estate, etc.). Here, again, the question is whether they are true culprits due to unwillingness to pay or whether they are victims due to inability to pay.

I read all the time how inefficient the Greek tax collection system is but, then, I often hear stories from friends where I have to marvel about the efficiency of the Greek tax collection system. One of my friends who is 59 and has been without official income for over 2 years inherited a small house in Litochoro. The authorities have now required him to produce evidence that the house was built before 1955, otherwise it would be deemed as an illegal construction and all sorts of penalties would become due. There is a court document on record where his grandfather swore under oath during the 1950s that he had owned the house since 1940. That, however, is not good enough. The authorities want an official record and my friend doesn't know how he can produce one. He fears the penalties might exceed what the house is worth today. Add to that the taxes he has to pay on income which he doesn't have but which he is deemed to have because he owns a car and the apartment where he and his family of 3 live and you can understand that the man fears to soon be financially wiped out.

Or my sister-in-law, a grammar school teacher with low income, who was presented an aerial photograph showing that her balcony in central Thessaloniki exceeded the approved limits. She had not made any changes to the balcony since she bought the apartment but that is irrelevant; she has to pay. Now, that is quite an efficient tax collection system as far as I am concerned!

And those very same tax authorities have trouble discovering swimming pools in Athens, to use that famous example? To identify the owners of anonymous corporations which own luxury real estate, yachts, etc.?

I am all for chasing past-due taxes from subjects who have the ability but not the willingness to pay. When it comes to tax subjects who have no ability to pay, one has to wonder how those tax obligations came into existence in the first place. It serves the state no purpose to build up 'legacy' when there is no hope of ever collecting that 'legacy'. More importantly, it is simply immoral to tell financially insolvent tax subjects that their tax liabilities keep going up.  If I were one of the latter, I wouldn't give a damn about a possible bank run. I would vote for SYRIZA if they promise to help me get out of my bind.