New capital repatriation plan

Finance Ministry intends to offer incentives for return of undeclared incomes from accounts held abroad By Prokopis Hatzinikolaou

The issue of repatriating capital derived from undeclared incomes is returning to the negotiating table, as the government intends to present a plan for the return to Greek banks of deposits held abroad to its creditor representatives in September.

The Finance Ministry has prepared various plans since November 2012 that will be submitted for processing to the European Commission’s Task Force for Greece, which will be presented later to the country’s creditors.

Still the troika of lenders – the Commission, the European Central Bank and the International Monetary Fund – have already ruled out any possibility of favorable measures for foreign-account holders. They argue that such a regulation would set a bad precedent as it would lead anyone with undeclared incomes in Greece to take their money out of the country and then repatriate it on favorable terms.

The ministry’s response will rely on the safety clauses created by recent changes in the tax administration. As a top ministry official noted, the monitoring mechanism is now better equipped to pinpoint instances of tax evasion and identify anyone who chooses not to use the favorable regulation for capital repatriation as well as to establish when the undeclared money was deposited abroad.

The plan for the return of capital provides for a small, one-off tax and long-lasting tax exemptions for the funds that return to be used for investment. The aim is to impose a small tax rate to encourage tax evaders to declaring incomes and assets that have been hidden from the authorities, which may be in the form of real estate, shares, bonds, bank deposits, gold, artworks and so on. A previous ministry proposal included a rate of 8 percent. The special regulation will exclude funds deriving from criminal activity or belonging to politicians and others who have held key public office positions.

Anyone who chooses not to repatriate undeclared funds and is traced by the monitoring authorities will face a steep fine and be taxed at the maximum rate. The longer the deposits have remained abroad, the lower the tax rate will be upon their repatriation.