Tax evasion

Alarm bells started ringing for the government when the Economy Ministry demonstrated conclusively the extent of tax evasion still going on in Greece. By cross-checking the tax returns of the clients of 50 percent of the largest companies, the ministry uncovered tax evasion amounting to the colossal sum of 7 billion euros. In fact, by checking just 4,000 pairs of invoices from some 1,000 companies, they confirmed tax evasion of 5.3 billion euros. In other words, each of those 1,000 companies failed to pay taxes of almost 6 million euros. National Economy Minister Giorgos Alogoskoufis gave the order for the immediate mobilization and coordination of inspectors, formal certification of the infringements, imposition of fines and activation of the law which, in cases where serious tax crimes are documented, includes temporary closure of businesses. He himself undertook to make a weekly check on how his orders were being implemented. These measures are necessary, of course. One need only compare the 7-billion-euro tax evasion with the 4.7 billion euros in taxes that companies actually paid as legal persons to understand the extent, and the seriousness, of the problem. Inspections are necessary but taken alone they are hardly sufficient. The real challenge is to create a stable framework within which entrepreneurs (like all other taxpayers) are obliged to change their mentality and meet their tax obligations to the full, according to the law. This approach is vastly superior to one-off deals undertaken to raise revenue every two to three years, and only adopted when matters finally reach breaking point. Tax evasion must be stamped out for once and for all. Ongoing inspections, stricter penalties, and putting an end to the policy of reaching periodic settlements of outstanding cases will eventually suppress the long-running scourge tax evasion. So will the announced reduction in future tax rates, which will put paid to the excuse of unfair levels of taxation as reason for evading tax obligations. In this context, the government’s use of auditors in carrying out inspections of errant companies will contribute to a drastic curtailment of the phenomenon of illegal tradeoffs between entrepreneurs and tax officials. Thus it would also deal a powerful blow against a primary source of widespread corruption.

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