ECONOMY

Bureaucrats conspire to deprive exporting companies of capital

Exporting enterprises have long benefited from a reimbursement of VAT they have paid for any purchases they have made as well as the costs of exporting their goods abroad. This measure has been designed to aid exporters without directly subsidizing them. However, the notorious state bureaucracy and gaps in a number of circulars issued by the Ministry of Economy and Finance mean that 15,000 exporting firms have not received back the VAT they have paid since January 2003. This deprives them of vital working capital and puts them in a difficult financial position. Nothing could be designed to hurt exports more at a time when, despite a recent rise, they remain woefully low: Greece lags behind all its European partners, behind even tiny Luxembourg, in the nominal value of its exports. The situation makes a mockery of the pre-election promise of the ruling Panhellenic Socialist Movement (PASOK) to «raise exports, as a percentage of GDP, to double digits as soon as possible and despite adverse international conditions.» It seems that nowhere are the conditions for exports more adverse than in Greece itself, despite repeated reassurances by Economy and Finance Minister Nikos Christodoulakis that the reimbursement of VAT will take place as soon as the businesses submit the required documents (proofs of purchase etc.). Firms attempting to follow the ministry’s circulars to the letter have encountered insurmountable problems in getting the VAT reimbursed. Speaking to tax and other ministry officials, one gets a confusing picture. Some say the ministry’s circulars are too vague concerning the procedure of reimbursement, others that public coffers are empty. In February 2003, PASOK MP Andreas Makrypidis, a former tax inspector himself, asked Christodoulakis whether the tax authorities were illegally withholding VAT from exporters. In his written question he noted that tax authorities claimed that ministry circulars were too vague about the procedure. In April 2003, the Economy and Finance Ministry tried to speed up the process by specifying that exporting enterprises whose supporting documentation was found correct would be reimbursed within two months. This procedure failed to be implemented properly because tax authorities took months to determine whether all supporting documents were in order. Recently, after a long delay in taking action, the ministry revised yet again the procedure for reimbursement. In case businesses submitted all the required documentation, they would be reimbursed for 90 percent of the amount they requested within one month. They would get the other 10 percent after a preliminary on-site inspection and auditing before the end of the year in which they made the reimbursement request. Enterprises that submitted incomplete documentation would get 90 percent of the money within two months but only after a preliminary on-site inspection and auditing. The procedure may appear relatively straightforward, by the standards of the Greek administration. However, local tax authorities managed to sabotage it by claiming that part or all the documentation submitted was false. The law provides the heads of local tax authorities to come to this conclusion very easily, invoking «reliable information» without much burden of proof. This leads inevitably to a full-scale auditing of the company, a time-consuming procedure. Is it willfulness on the part of the tax authorities, or are they following secret instructions by the ministry? In any case, exporters are not getting the VAT they paid back.