Gov’t vindicates those who chose not to pay their taxes before it took office

Supporters of the “I Won’t Pay” movement are being vindicated by a new plan unveiled by the the SYRIZA-led government earlier this week for the repayment of expired debts to the state, which provides for the write-off of up to 50 percent of the total – including the original money owed – from income taxes and property levies imposed through electricity bills since 2013.

While it is a fact that in the past few years thousands of taxpayers have been legitimately unable to meet their obligations due to shrinking incomes and rising levies, this does not apply to all state debtors. With no ceiling set out in the new scheme, even those with arrears of more than 1 million euros can apply for a settlement.

All payment plans offered to date have failed to bring any significant revenues to public coffers. The last scheme introduced by the previous government allowing repayment in 100 installments is no exception: According to Finance Ministry data, this plan has only attracted 195,000 taxpayers and corporations out of a total of 4.1 million debtors, with the arrears settled reaching just 2.1 billion euros from a total of 76 billion euros owed.

The payment plan that is currently being drafted by the new government has the added advantage of offering a write-off that may come to as much as 50 percent in certain cases. This concerns debts generated up to end-2013, while the plan overall addresses debts created by December 31, 2014. If the new law is ratified by Parliament, debtors will be able to settle their arrears in up to 100 monthly tranches at a minimum rate of 20 euros per installment.

Debtors who owe 5,000 euros or less and join the new scheme will see the interest – currently at 4.56 percent – waived.

Alternate Finance Minister Nadia Valavani said on Wednesday that the plan will be presented to Cabinet before it is finalized by the ministry, which is allowing for some changes to be made. She warned that private debt is a ticking bomb for the state and said that its size proves the inadequacy of the country’s austerity program, which resulted in around one-third of the population accruing debts it can no longer service.

One thing that is certain is that the new payment plan will provoke strong reactions from the country’s creditors, who had even opposed the scheme for 100 installments introduced by the previous administration.

Still, Valavani insisted that if the new plan is implemented it will bring significant revenues to the state. She argued that of the 76 billion euros of expired debts some 9 billion euros, or 11.6 percent, can still be collected. The bill is expected to be presented to Parliament on Tuesday and will likely be voted into law by the end of the week.

Once the plan is implemented the deadline for the settlement of debts created up to end-2013 will be April 30, providing for a cut of up to 50 percent in penalties, fines and the original debt. The deadline for inclusion in the 100-tranche plan will be May 31.

In practical terms this means that taxpayers with income or property tax arrears who pay a minimum of 200 euros toward their debt by end-April will have an equal amount of their first payment written off their total debts to the state and will be able to repay the rest in 100 installments.

For instance, if a debtor owes 5,000 euros in income tax, of which 3,000 euros concerns the original payment and the remaining 2,000 euros penalties and fines, he or she can pay a lump sum of 2,500 euros and see the remaining 2,500 written off immediately. If the lump sum is 1,000 euros in advance, the tax authorities will write off another 1,000 euros from the debt and the remaining 3,000 euros can be repaid in 100 monthly tranches of 30 euros each, as no interest will be payable. The advance payment will have to be a minimum of 10 percent of the total debt.