Persistent hemorrhage

Inspections so far conducted by the SDOE financial crime squad confirm existing concerns: Widespread tax evasion by Greek taxpayers persists, taking a heavy toll on state revenue. The current fiscal instability, which has also marred Greece’s relations with the European Commission, is another offshoot of that factor. In targeted inspections conducted during March 2005, 37 percent of the firms were found to have violated the tax code. In 510 inspections carried out by the tax watchdog over the past few days, the violation rate hovered at 60 percent. The rise should be attributed mostly to the intensification of SDOE inspections (it should be noted, however, that tax dodging tends to be higher than average during this time of year). In any case, tax evasion has reached unnerving proportions that far exceed the European average. Most alarming is the fact that violations are not limited to specific sectors that are considered to be more vulnerable. The root cause of the problem has to do with public attitudes, as after 25 years of Greek membership in the European Union, tax evasion is still widely tolerated. People do not see it as anti-social behavior, much less as a crime. True, establishing a tax-paying ethic takes time, particularly in a society that has historically been skeptical toward the state. But the current tax system is sorely lacking in terms of social fairness, while it also draws little respect from the people. It is an open secret that the Economy Ministry apparatus is awash in corruption. Self-evident as it may sound, we must emphasize that inspections aim at fighting tax dodging; they are not a means to intimidate or blackmail taxpayers. Last but certainly not least, they should never be treated as a source of profit for the inspectors themselves. In light of current circumstances and Greece’s mammoth deficits, inspection is the state’s only weapon that can yield immediate effect. This is why the process begs for redesign. The government must strike a balance that will combine credibility and effectiveness. Inspections have been successful in tracking down tax evasion by small and medium-sized firms, but the same cannot be said of sophisticated financial crime. There is no other way but to curb such violations.