Taxing the public’s limits

Unless the government does an about-turn, in a few days’ time an unsuspecting public will become part of a massive and unprecedented experiment that will test the great structures of modern Greek society – the government, the state, petroleum companies and the banking system – as well as the patience and endurance of citizens. Despite plenty of unofficial efforts at damage control in the last few days suggesting that the deadline will be postponed and the system changed, the government has set Tuesday, October 15, as the day on which heating oil and the diesel used by vehicles will begin to be sold at the same price. In other words, the tax on heating oil, which was much lower, will be raised to the same level as that of diesel fuel in an effort to drain the swamp in which fuel smugglers have amassed untold riches. The theory is simple and (as is customary with theories) faultless: if the same «special consumption tax» is imposed on heating oil and diesel fuel, the smugglers will have no incentive to buy heating oil, remove the added color, and sell it at huge profits as engine fuel. In this way, the government is expecting to boost budget revenues by 1 billion euros, as estimates of money lost to smugglers range between 600 million euros and 1.5 billion euros annually. But the new tax rate means an increase of at least 40 percent on what families will have to pay for heating oil this winter. In order to avert a revolution, the government immediately declared that it will refund consumers the tax that they will have paid for heating oil. After a few days of thinking about the issue, the government initially let it be understood (unofficially, as usual) that banks would handle the refunds. But this would mean that from one day to the next, every home owner and every person renting a home that does not have natural gas would have to start an intimate new relationship with a bank. This would occur irrespective of whether the people involved were students or pensioners, overworked or unemployed. However simple the procedures might be, tens of thousands of people would be crowding into banks on any given day, waving receipts and other papers and multiplying the queues that already plague the system. Millions of new documents would be involved, creating a new bureaucracy and wonderful opportunities for an army of smugglers and counterfeiters. It will be interesting to see how the banking system will cope and how much each transaction will cost, because it is most unlikely that the banks will risk their personnel, organization and software networks collapsing under the onslaught of millions of highly irate citizens without making some money out of it. But even if the tax is refunded in an impeccable manner, the price of heating oil is expected to be significantly higher this year. International oil prices are already at an all-time high, hovering around 80 dollars per barrel, and now the heating oil supply companies will have to pay the full tax in advance, which means that they will have to secure more financing and undoubtedly pass the cost on to the consumer. Also, even if the suppliers’ profit margin were to stay the same, profits will be calculated on the basis of a more expensive product, which means, once again, that the consumer will be paying more than last year. Under the old system, 1,000 liters of diesel for vehicles would have cost 1,000 euros, whereas the cost for heating oil would have been 600 euros. The special consumption tax would be 276 euros for diesel and 21 euros for heating oil, with the Value Added Tax amounting to 52.44 euros in the former case and 3.99 in the latter. Therefore, one would expect that together with the tax refund the price of heating oil would be about 60 cents per liter. But with all the additional costs, it is quite possible that the price will end up at about 65-70 cents per liter. And this is without taking into account the time and money everyone will waste in trying to get the refund. The whole situation is an admission that the authorities cannot control the few who benefit from the smuggling. So everyone must suffer. Unless the government is so sly that it rushed to announce this spectacularly painful measure to show how seriously it takes the issue of oil smuggling. Maybe it really will take decisive steps to control the market – from refineries to the fuel pump – in order to stamp out the problem at its root. But if there is to be method in its proposal, it will have to find a simpler procedure (perhaps obliging the oil companies to deal directly with the banks) that will leave the consumers out of the process. Otherwise, it will suffer the high political cost of public anger and will have failed in the task for which it was elected: improving the lives of citizens.

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