A VAT mistake will finally be corrected

With great delay, Economy and Finance Minister Giorgos Alogoskoufis has decided to correct a mistake that cost public coffers hundreds of millions of euros in revenue. New in office and perhaps a little misguided, the government in the summer of 2004 decided to lift penal sanctions for firms accepting bogus receipts, which enabled them to deduct amounts of value-added tax (VAT) they had never paid from their own payable dues. The issuing of such receipts remained illegal, but for all intents and purposes it made no difference: The issuers were never going to be caught because they were bogus companies with fictitious names and addresses. The mistake led to a sharp drop in receipts. Correcting it must be done in such a way as to send a stern message to the perpetrators. Besides, the extent of tax evasion in Greece has become not just offensive but phenomenal, even for the country’s infamously large underground economy. I often hear the excuse that the decline in VAT revenues is supposedly proof of the difficulties which enterprises, particularly small and mid-sized ones, are facing, and that these woes are driving them to tax evasion. Nothing could be further from the truth. I would understand a firm facing a crisis or liquidity problems if it tried to show few profits in its books in order to trim the taxes it has to pay. But not paying the government VAT which it has already collected is outright robbery, and those who do it must be held accountable. Besides, what difficulties or lack of business are we talking about? Official figures show that consumption is growing at an annual rate of 7.5 percent but VAT revenues are only increasing at 4.8 percent (January-September 2005 period). The fight against tax evasion must now be waged with new tools, perhaps with new teams of tax inspectors and new draconian laws. In any case, it is not just simply an injustice but a crime for the country’s credibility to be compromised in Brussels, and for wage earners and social spending to suffer cuts because some unscrupulous businesspeople are evading taxes. This extensive evasion, done with the toleration – if not the connivance – of the state, is proof of serious corruption. Development Minister Dimitris Sioufas’s boasting on Wednesday that «we have arrested the decline» because the country now appears to have gained two places in the world transparency table, from 49th to 47th, is at least immodest, if not laughable.