ECONOMY

Draft bill increases arbitrary powers of tax officials

A chartered auditor, with a long international experience, makes an interesting observation: «Greece is the only country where newspapers frequently give publicity to threats of tax sweeps on enterprises and to the supposedly important and shocking findings of inspections. How would you expect foreign investors to bring their money here in such a climate? Even if Greeks believe such sensational announcements are simply wishful thinking, foreigners naturally tend to take them at face value». Indeed, taxation policy, irrespective of the government, is a policy of psychological war, aiming to scare taxpayers away from tax evasion. And for the threat to be convincing, there is a legal framework to back it up. The inspectors and their superiors have limitless as well as arbitrary authority to approve as deductible any expense they wish. They can claim, for instance, that staff travel expenses for a visit to an exposition abroad are not useful for a firm’s productive activity and are therefore non-deductible. Likewise for subscriptions to foreign magazines. Inspections can easily lead to finding a firm owing 1 million euros or, just as easily, twice that amount, being entirely at tax officials’ discretion. And one would not be hauling coals to Newcastle by saying that their judgment is usually influenced by non-objective factors. The draft bill about money laundering which the government will soon submit to Parliament now provides for even stricter penalties than before, defining as criminal any tax violation which produces for a firm assets of more than 4,000 euros. It must be noted that EU Directive 2001/97, which the draft bill incorporates into Greek law, refers to a violation which can yield «substantial proceeds.» But a sum of 4,000 euros cannot be considered as substantial proceeds by an objective measure for firms with large turnovers. It will, nevertheless, function as one more threat and will render businesspeople liable to punishment, even if it has accrued from an unintentional mistake. If, for instance, inspectors reject as non-deductible an expense of 15,000 euros, a managing director can be charged with tax evasion and money laundering – even if the expense has been effected. With the new law, the authority of the tax department is so enhanced that even for a small or controversial violation the inspectors will be able to waive not only the threat of a high fine, as hitherto, but also the disgrace of money laundering. Alas, tax evasion could be fought in much simpler ways. Especially for large companies that are inspected by professional auditors, the responsibilities should belong to them. The tax inspectors should not enter into negotiations with businesspeople. They should inspect the auditors. If tax rates are also reduced at the same time, no one would have a reason to evade or succumb to blackmail.