ECONOMY

Four out of 10 businesses cheat on taxes

Four out of 10 businesses inspected by the Finance Ministry’s Special Inspections Service (SIS) in January were found to have violated one or more provisions of the tax code, data made available yesterday revealed. The government, under pressure from the European Union to reduce the budget deficit, has acknowledged that tax evasion is a major problem and the primary reason the initial revenue targets set at the 2005 budget were not attained. For this reason, the Finance Ministry has told tax authorities and the SIS to intensify inspections, giving priority to payment of value-added tax (VAT). Priority inspections are focused on areas with significant VAT revenue shortfalls and on enterprises that have claimed large VAT rebates. SIS inspected 3,753 businesses of all sizes in January and found tax code violations at 1,562 (41.6 percent). On average, the businesses found at fault violated eight provisions of the tax code. The findings are in line with those from 46,150 inspections conducted last year. Then, 42.3 percent of the businesses were found in violation of the tax code, up from 29 percent in 2004. Then, as in the more recent data, tax evasion was more acute in the transport and construction sectors and among travel agencies, wholesalers, retailers, hotels and restaurants. The regions where businesses are most likely to violate the tax code are Western Macedonia, with a delinquency incidence of 56 percent; the Peloponnese (55 percent) and Attica (45 percent). SIS plans to increase its inspections in 2006 to over 70,000, up from 46,150 in 2005. The inspections will be unannounced and will mostly focus on big enterprises, technical and construction firms and those with a history of issuing or accepting fake invoices. The Finance Ministry will also target companies and self-employed professionals who fail to submit their quarterly and annual VAT declarations. It has sent instructions to local tax offices spelling out the procedures to be followed in retrieving undeclared VAT as well as the fines to be imposed on negligent businesses and individuals. Those found through the TAXIS electronic system not to have submitted their VAT declarations will be called on, by phone or letter, to provide the information to their local tax office within four days and pay the fines. If they do not appear, they will be subject to close scrutiny of their books.