ECONOMY

Bureaucracy and the tax system hurt competitiveness

Competitive stagnation, a characteristic of Greek businesses noted in the latest study issued by the World Economic forum, brings to light once again the difficulties burdening the Greek economy. Despite the fact that the companies themselves bear much of the responsibility for this stagnation, the state and the public sector are also partly to blame for the problem. Hundreds of managers, whose opinion was surveyed by the World Economic Forum (WEF) for the 2004-2005 study, once again pointed their finger at bureaucracy and the taxation legal framework, naming them as the two chief factors preventing the enhancement of enterprise competitiveness. This responsibility is highlighted by the extremely low grade given to Greece in the category «Government and Public Sector,» one of the parameters considered for the projection of the country’s final rating regarding the competitiveness of its national economy. In this category, one among 10 considered, Greece was given its lowest rating, being awarded 3.3 points with a highest possible rating of 7. In considering the competitive position of countries under consideration, the WEF evaluates such elements as human resources, infrastructure, public institutions (e.g. justice, freedom of the press), the degree of market deregulation and the availability of funds, projections concerning the overall economy, the operational status and strategies of companies, the availability and use of technology, the social and environmental policies applied, and the degree of local competition. Greece once again got its top grade (4.96 out of 7) in the category of human resources, underscoring the fact that they continue to represent its most important asset. In the «Government and Public Sector» category, Greece received a slightly better rating last year in comparison with 2003, when it got only 3.09 points. In order to determine the final grade in this category, managers participating in the survey were asked to grade the public sector’s performance in 14 fields: customs legislation; the efficiency of customs authorities regarding imports; Parliament’s efficiency as a legislating and overseeing body; provision of government information on policy changes to enterprises; the efficiency of the agricultural sector; the efficiency of public expenditure; whether contributions to political parties affect policy; the extent of illegal contributions to parties; whether taxation acts as a counterincentive; the level of citizens’ trust in the integrity of politicians; whether politicians do favors for businesses; the extent of local bureaucracy and whether it impedes competitiveness; the same for central government; and the complexity of the taxation system. Managers replied that Greece’s tax system is extremely complex and represents the most important problem companies face, followed by the administrative demands of the central government as well as of local authorities. Such demands translate specifically to the large number of permits needed in order to pursue different kinds of business activities, the rules and regulations companies must follow, and the reports they must file, increasing their operational costs. On the contrary, customs and import procedures represent possibly the only positive feature the public sector is able to exhibit. Mistrust Another problem defined by the survey concerns the lack of trust of Greek businessmen toward government officials. A large percentage of managers stated that official decision-making, or the adoption of new policies concerning public procurement, is often influenced by special relationships maintained between specific companies and public officials. After the human resources and infrastructure categories, for which Greece gets its highest ratings, come the country’s public institutions. In this category Greece got a grade of 4.73 points for 2004, up slightly from 4.69 in 2003. This category could have received an even higher rating were it not for such factors as tax evasion and white-collar crime. Yet, progress is being achieved on this front, especially concerning the increasing degree of transparency in business-to-business transactions. Commenting on the results of the survey, Odysseas Kyriakopoulos, chairman and executive president of the Federation of Greek Industries (SEV), said that entrepreneurship, the modernization of structures and productive processes, cost controls, the enhancement of products and services and other such factors are not enough to improve the competitive position of Greek companies. Improving the overall environment in which the companies operate is also very important. Care must immediately be taken in order to improve the operation of the public sector and its relationship with business, Kyriakopoulos said.