The sharp slowdown in budget revenue collection in April and May has raised alarm in the Finance Ministry, which is considering a host of measures, particularly against tax evaders. Economy and Finance Minister Giorgos Alogoskoufis and his deputy, Antonis Bezas, are reportedly furious as analyses have shown that the downturn is exclusively attributed to fewer taxes paid by major enterprises, banks, industries, and insurance and trading companies. This time, it appears, tax evaders have a name and address, becoming a challenge for the government, who had tried to help enterprises by promoting development through tax cuts. Major enterprises seem to have responded by stating smaller profits, paying less value-added tax and using accounting tricks to evade taxation. Tax evasion among major companies became possible due to the helping hand of a corrupt tax mechanism. Therefore Alogoskoufis and Bezas are determined to ensure inspections will go all the way. However, in anticipation of the ministry’s measures, tax-experienced technocrats hope that this time tax evasion will become a crime, in the same way that the Accountancy Standardization and Monitoring Commission of the Finance Ministry dared to penalize certified accountants who sign company financial reports which they know to be concealing profits. Revenue shifts In the first five months of the year the state received 1.5 billion euros, against just 650 million euros in the same period last year. There is overall progress, but while revenues grew by 15 percent in the year’s first quarter, in April and May that rate dropped to 2 percent or even less. Bezas was told last week that May records in major tax offices, which receive almost all corporate taxes, ranged from a revenue growth of 2.65 percent to a decline of 7.68 percent. In the year’s first five months, the Special Inspections Service (YPEE) has found that 43 percent of the 22,976 enterprises checked were evading taxes, according to data released yesterday. Among travel agencies the ratio rises to 52 percent and it stands at 49 percent among hotels and restaurants, at 47 percent among service-providing companies and at 45 percent among construction firms. The situation is at its worst in the Peloponnese, where 63 percent of those checked evaded taxes, followed by Western Macedonia (53 percent) and Attica (46 percent). Companies stated 320 million euros less as taxable earnings for 2005 than for 2004, citing a decline in construction activity and the decrease in profit margin because of the energy crisis and the rise in raw material prices. Tax officers who follow these companies cite the same reasons, adding that the decline in tax rates this year from 35 percent to 32 percent is enough to explain the shrinking tax receipts. Bezas may be relatively new to the ministry, but knows better than that. He is convinced that checks in major companies are insufficient and does not rule out trade-offs. So he made the following moves: – He instructed the General Secretariat for Information Systems to conduct additional cross-checking on the 5,000 biggest companies to locate bogus transactions through which huge VAT sums are stolen. – He set up a committee which will assess all serving inspectors in centers monitoring major enterprises. Although this assessment is provided for by a 1995 law, it has never been implemented. For every inspector the committee will record the number of cases checked in the last three years, the number of administrations checked, the way of completing checked cases, the total sum as well as every year’s sum of tax imposed, and data from personal records. Crucially, this inspection will be completed by the end of this month so that Bezas will know which tax officials sabotage the fight against tax evasion. – Major companies will be forced to draft and submit to tax authorities financial reports according to International Financial Reporting Standards, through which their profits will increase and they will have to pay additional taxes. In order to hide their earnings, companies used a 2002 law providing for any firms merging with their subsidiaries or absorbing others to be taxed in their next financial year with a rate 15 percent lower. Bezas agreed with Alogoskoufis on a clause that cuts tax reduction into three installments instead of a lump sum. Alogoskoufis has confirmed the broad use of that loophole by banks, which, despite their high profits, paid lower tax thanks to merging with their subsidiaries. Although the tax deposit rate for banks this year was raised from 60 to 80 percent, the ministry did not receive even one extra euro. Bezas is now considering raising it to 100 percent.