ECONOMY

Tax regime criticized

The state, and the tax authorities in particular, often act in ways that hinder business activities, participants at a conference organized by the American-Hellenic Chamber of Commerce said yesterday. In a report he presented to the conference, Ombudsman Giorgos Kaminis said, after interviewing ministers, high-ranking civil servants and businesspeople, that bureaucracy is a drag on entrepreneurship and that the legal framework is too complicated, adding costs for the businesses, both at the crucial early phase, during and shortly after incorporation, and during operation. On a more practical level, the ombudsman blames tax authorities’ practices, such as estimating revenues following random inspections. Such practices, he says, hinder the regular taxation process and mean that the state treats taxpayers, whether individuals or enterprises, as guilty of tax evasion before such guilt is established. The ombudsman understands the need to fight tax evasion but claims that the authorities’ approach is flawed, especially because tax inspections are random and take place at irregular intervals. Several examples of such inspections and how they add to corporate taxation were presented at the conference. One concerned a company that tax authorities had not inspected for over 11 years. They then did a thorough inspection concerning all these years, which lasted 10 months. On a daily basis, some of the company’s personnel was occupied in assisting the tax inspectors. Several times, employees who had retired or moved to other jobs had to be summoned to be questioned about old data. At the end of the inspection period, a 300-page report was drafted and the differences the inspectors discovered in the books were enough to require the company to pay 50 percent of its earnings as tax instead of the usual 25 percent corporate tax. Stavros Costas, head of the American-Hellenic Chamber of Commerce’s committee on taxation, said that the tax authorities actually aim at «discovering» extra earnings amounting to 0.5 percent to 2 percent of the company’s turnover. In the latter case, the taxation rate may exceed 42 percent of the actual profits. Some of these extra turnover amounts are real and some are questionable: However, a report has found out that 72 percent of the inspected companies prefer to settle there and then with the state and only 28 percent take their case to the administrative court. The settlement is made to avoid what amounts to harassment, Costas said: It has been observed that companies involved in court procedures against the state suddenly find the tax authorities sharply increasing, even multiplying, their claims. Deputy Finance Minister Antonis Bezas told the conference that his ministry will keep conducting such inspections to fight tax evasion. He claimed that they are being conducted on an objective basis and that they are transparent. He did acknowledge, however, the existence of corruption among tax officials. Former Economy and Finance Minister Nikos Christodoulakis said that the state should not lower corporate taxes further, but called for breaks for foreign investors and a windfall tax on companies with excessive profits.