Tom Ellis TOM ELLIS

Taxes and social justice

COMMENT

What the Greek government is doing at the moment is trying to redistribute the pie before making it bigger.

TAGS: Taxation, Politics, Society

Greece’s budget deficits and public debt are the responsibility of politicians and senior public sector officials who have squandered state money. Also to blame are bankers and entrepreneurs, big and small, freelance professionals, as well as civil servants and pensioners.

The problem was not just the haves who took advantage of the situation, and the PASOK and New Democracy governments which were, most of all, interested in extending their rule rather than boosting competitiveness and seeing the economy built on solid growth fundamentals. It was also the labor movement and the unionist leaders with their endless demands for pay hikes while competitiveness dropped. Pensioners too put a hefty strain on the country’s social security system, the most provocative manifestation of the problem being the early retirement of people as young as 35 at the expense of the rest of society.

As a result of all that, a big hole was created which threatens future generations. In order to plug this hole, the country needs growth; and this will not come about with a policy based on overtaxation. What Greece’s leftist-led government is doing at the moment is trying to redistribute the pie before making it bigger. Injustices do exist, and there is a need for fair burden-sharing. The policy of high taxes is choking the economy while also taking a toll on the have-nots.

Data published in Kathimerini’s Sunday edition show that 19 percent of Greek citizens pay 83 percent of total taxes. Of a total of about 8.8 million taxpayers, 80 percent, or 7.1 million, pay from zero to 100 euros per month in taxes.

Even if the government claimed to be working in the direction of social justice, the result is actually hurting the have-nots. This is because the haves, and those who can, will simply either leave the country or transfer their business activity abroad. Or they will no longer have any incentive to produce wealth, so they will either not hire more staff or engage in tax avoidance.

For this reason a reasonable approach is required that will not hit the middle class but also not drive away the haves – that is, the two sections of society that represent the driving force of the economy. It is them, not the state, who will create the growth that will lead to a rise in employment and a sustainable rise in public revenues.

Like Greece’s international creditors have been asking for years, the debt-wracked nation needs to expand rather than shrink its tax base.

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