ECONOMY

Corruption hits firms

The practice of kickbacks being paid to civil servants in order to deal with a case promptly is rife in Greece, which also suffers from excessive red tape, lack of transparency and an arbitrary interpretation of tax laws by officials. These phenomena deter foreign investors and lead Greek businesspeople to focus their efforts on other Balkan countries. Worse, all this is known at the highest levels of the Finance Ministry, with ministers and deputy ministers appearing unable, or unwilling, to control the practices of their own civil servants. The latter simply ignore any injunctions by their superiors who, in turn, are loath to anger a well-entrenched and militant guild such as the tax officials. All these are widely known facts and they were exposed once again on Wednesday at a conference on «Tax and Growth Reform,» organized by the American-Hellenic Chamber of Commerce. Most of the conference speakers told lurid tales of backroom dealings and outright extortion by tax officials that appear to be the rule and not the exception. Tax inspections Giorgos Samothrakis, a chartered accountant with Pricewaterhouse Coopers, brought up the example of a foreign technical firm, which, desiring to invest in Greece, asked for his advice. Samothrakis provided the company with the relevant legislation and explained to them that the corporate tax on profits is 32 percent (the government is gradually cutting the tax from 35 to 25 percent). However, he told them, things are not so straightforward. The final tax they will pay will be calculated by tax officials after an inspection they will conduct, most likely five years after the company starts its activities in Greece. Samothrakis explained that, on average, tax inspectors aim at collecting a tax equal to 1 percent of turnover annually and that they advise businesses not to complain if they do not want a full-blown investigation that is certain to unearth accounting technicalities for which the company must pay heavy fines. The prospective investors were amazed, especially when Samothrakis advised them that the smart tactic is to shut up and pay up and not attempt to legally challenge the tax authorities. Needless to say, the company canceled its investment plans. The speech by the head of the American-Hellenic Chamber’s committee on taxation, Stavros Costas, was in the same vein. He said, essentially, that enterprises are forced to pay to ensure their peace of mind. «The multiplicity of laws and the opaqueness of their provisions impede the equal treatment of all enterprises. The usual tactics include arbitrary rejection of expenditure items for productive purposes and preventing the firms from exercising their constitutional right to court protection,» he said, adding that, according to his estimates, the actual taxes enterprises pay amounts to 56.2 percent of profits instead of 32 percent, as the law says.