Tax mechanism efficiency grows, but so do debts

Greece’s tax administration is finally starting to show signs of functioning properly as displayed by the receipts of expired debts.

Data published on Thursday by the Finance Ministry for the January-June period showed a 34.43 percent increase compared to the same period last year, although new debts are piling up due to households’ and corporations’ inability to respond to their obligations.

From May till the end of June, expired debts grew by 614 million euros. Expired debts to the state have grown by 3.66 billion euros since the start of the year, taking the total amount in debts at the end of the first half of the year to 59.8 billion. This breaks down into 21.8 billion euros from taxpayers and 38.2 billion from enterprises.

Over a third of the debts (21.8 billion euros) are in the form of fines for violating corporate tax regulations, and their settlement is seen as highly unlikely. As a result, the Finance Ministry has proceeded to the retroactive reduction of fines imposed on enterprises and taxpayers in cases where they are seen as too high to be paid off.

Expired debts from the nonpayment of value-added tax amount to 13.3 billion euros and debts from the nonpayment of income tax total 10.6 billion euros.

The ministry data reveal a considerable increase in debt collection compared with the first half of 2012. Tax authorities brought in 355 million euros more this year through the end of June – i.e. 1.39 billion euros against 1.03 billion in the same period last year. This rise, the ministry statement said, could have been greater had it not been for three factors: the extensive reorganization of the tax collection mechanism whose benefits will take some time to become apparent, taxpayers insistence on waiting for a favorable settlement plan to be announced before paying their debts, and the negative impact of the continued recession and growing unemployment.

In the first half of the year, tax authorities collected 11.86 billion euros against a target of 12.51 billion euros – i.e. a 5.2 percent shortfall.