Falling revenue

The Ministry of National Economy’s decision to criminalize the issuing of bogus invoices is part of a broader government drive to reverse the trend of decreasing state revenue. By bringing back a measure that was first introduced by the Socialist PASOK administration in 2002, National Economy and Finance Minister Giorgos Alogoskoufis effectively acknowledged that the factory of fake invoices is still going full throttle, taking its toll on public revenues from value-added tax (VAT). The revenues coming from this indirect form of taxation have nose-dived. It has become clear that the root cause of the problem is not the decline in business revenue as a result of the economic slowdown, but the embezzlement of VAT by a considerable number of businesspeople. As Kathimerini noted last July in a review of tax inspections conducted in the first half of the year, while retail sales went up by 8.5 percent, revenues from the collection of VAT rose by a paltry 0.2 percent. The large discrepancy can only be the result of extensive tax dodging, Kathimerini wrote back then. August figures confirmed the fears as revenue was steady or declined even in the most popular tourist resorts at a time when the number of foreign visitors was said to have increased. In moving to punish tax dodgers, the National Economy Ministry appears to have acknowledged the problem and to be taking steps in the right direction. However, criminalization is not a panacea. The government must examine all the factors that are believed to be responsible for the falling revenue, ranging from the dullness of state watchdogs to organizational deficit. Statistics indicate that the negative trend is not attributed to coincidental factors. Rather, experts point their fingers at more profound, systemic failures that threaten to bring about fiscal collapse. Unless urgent measures are taken, the state will asphyxiate due to lack of funds. Lacking resources will undermine social justice as the state will seek alternative sources of revenue and once again target those who can’t evade taxes – salaried workers and real estate owners being the most obvious targets. The country’s path to economic revival does not just go through fiscal revenue. It also depends on launching structural reforms and incentives for investment. But fiscal stability remains a primary condition for growth. The government must exhaust all options to ensure the payment of VAT. Continuing the existing impunity would be disastrous.