I had the pleasure of speaking to a lady working in Greece today and she was explaining the new taxes that have been introduced (in addition the ones already in place).
So we all know about the property tax, the special tax on businesses, the doubling of the price of fuel, the charging of the same years income twice, the increasing of VAT from 19-23%, the introduction of 23% VAT on food, the increase in road tax, the reduction of the tax free income from 12,000 Euro to 5000 Euro and the massive increase in complication for business owners despite government claims of cutting red tape. (And this is just the stuff I know about).
But that is the tip of the iceberg.
The central bank governor and their employee Papademos, the unelected Prime Minister and the Greek media have been banging for months now about how Greece needs an internal devaluation for the economy to become competitive.
Now assuming you think that is correct, which incidentally I do not, I think I am right in saying you also have to look at the cost of living in conjunction with falling wages because if you are blind to the cost of living you could be overseeing a Mad Max, road warrior situation and not even know it.
Aware or not, the “measures” being taken for an internal devaluation in Greece are not taking into consideration the cost of living at all.
As if the above taxes were not bad enough (the taxes are largely fixed and not tied to earnings) the Papademos regime is now piling more fixed taxes onto Greeks, which again, are not connected to earnings in any way.
What are these new taxes?
Income tax, except not based in income. Yeah, you heard me correctly and income tax, not based on income.
In addition to your normal tax return the Greek government is going to increase the income tax of people by using calculations which have nothing to do with income. Yeah, that’s what I thought…
These are the extra “income” taxes.
House size. The government is now saying if you have a house of so many meters then your income must be X and you will pay income tax on that figure, regardless of if you are working or not.
Car engine size. The government is now saying if you have a car with X sized engine, regardless of the year, make or model of the car, your income must be X, and you will pay an extra “income tax” based on the engine size. Even if you do not have a job.
And you have the same situation for boats and swimming pools, obviously car and house are the ones that effect everybody.
I do not want to sound redundant here but let me explain what this means.
The Greek political regime is saying it wants to reduce wages to make the Greek economy more competitive. And it is doing that through the slashing of wages, banks not making loans (yes, I think the government is working with the banks) to make loans and the cutting of the minimum wages and pensions.
And at the same time the Greek government is increasing the cost of living by inflicting taxes on the Greek people which have no connection to how much they are earning.
Things are completely out of hand and yet the mainstream media and government is trying to act like everything is okay.
This is not going to have a happy ending.
This may be news to you but it’s been a Greek innovation dating back 2 or 3 decades at least. Nothing new I am afraid.
The thinking is based on the following government thinking:
– We can tell from your lifestyle that you are evading tax by hiding income.
– There is no way for us to find out how much income you have hidden.
– Since we would have to audit almost everyone, we don’t have enough resources to audit you.
– Even if we could audit you there are so many complicated ways to hide income and the tax keeping system so antiquated (just been computerized in 2011) that we have no hope in hell of finding anything.
So, certain “tekmiria” (singular “tekmirion” – meaning both testimonial and assumption) were established. The presumption was that if you drove a BMW you should be making at least X per year. Now you may have declared half of that as earnings. Instead of performing an audit (see above) and hauling you to jail or at least giving you a hefty fine, we are going to tax you as if you declared X as your earnings and forget about it. It doesn’t matter that you bought the car last year and this year you are broke we are going to tax you on what WE BELIEVE you earned.
Cars and houses are a quick way of determining lifestyle. Boats too. Swimming pools maybe? I am not even sure most people know the full list of what tekmiria exist.
And therein lies the madness. It doesn’t matter if the car was a present from your brother who just won the lottery or your large house was an inheritance from a rich aunt (on which you paid inheritance tax already – probably by borrowing). The government is not taxing you on what you claimed you made, that would be stupid! They know you are lying…
A few years back I had a discussion with a person working for the Greek equivalent of the Inland Revenue. I was trying for about half an hour to explain to her that Greeks are taxed on presumed – not real income. When I finally got through to her, I pushed my point forward that this was both immoral and unfair. Unfortunately I didn’t convince her, she didn’t find anything wrong with the status quo. She thought it was a brilliant way of dealing with the tax-dodgers.
George, I am assuming you are Greek, which gives me some hope that Greeks see the immorality and stupidity of this system.
It also explains why there may be a problem with tax avoidance in Greece. I don’t care if you are American, Welsh, Greek, Japanese, people are people and if they are being treated immorally or unfairly they are going to do whatever they can to make it fair. Even if that means doing something which the government claims is wrong.
Again, I have written before about how I believe the whole “tax evasion problem” in Greece is being used as a proganda tool as a means of villyfying protesters by trying to make the only legitimate and most effective form of non violent protest socially unacceptable.
From an outsiders point (I write about Greece as I know many Greek people) of view it seems that the Greek government is deliberately and has been deliberately mismanaging the economy (knowingly or unknowingly) in the most stupid and inefficient manner as an excuse for Greeks not to have the same or better standard of living that Germans for example. (I see no reason why Greeks should not earn more than Germans)
As I have written before, if I wanted to bring a country to its knees I would not deal with the source of problems that I create, only the symptoms, that way I would have an excuse to build up a massive bureaucracy which would hinder the lifes of people and make their work inefficient and therefore keep their wages down.
Sometimes the whole situation makes me want to cry.
I can’t understand the Greek mentality. The property tax for example. People are not moaning about the fact that the government wanted to illegally cut off peoples power. Just that they cannot pay.
If you can pay or not. People should be protesting on principle.
Then again, as you say, the government have constructed a system where honesty and taxes are completely alien and irrelevant to each other. In a way the government have got people over a barrel, even though they have been in cahoots with fictitious tax returns for years, people are now scared in case something comes back to bite them.
Another reason why Greeks should be protesting on principle and not waiting until there is a problem.
If you legitimise the system by not protesting against it’s immorality then you are backing yourself into a corner if the sh** hits the fan in the future. The government has got something on you, so you feel you are impotent to protest because of your past transgressions.
This stuff has got to be nipped in the bud.
> Just so I do not misunderstand what you are saying. Greeks have been paying income tax on hypothetical income for decades?
To make it perfectly clear and avoid any misanderstanding a simple answer: Yes.
> George, I am assuming you are Greek, which gives me some hope that Greeks see the immorality and stupidity of this system.
Indeed I am and I do. However, most Greeks take it for granted. Perhaps they don’t realize that it’s not applied anywhere else in the known universe.
> It also explains why there may be a problem with tax avoidance in Greece.
Actually, if you want an excuse for tax evasion (avoidance is by legal means) there is a better one: Greeks do not trust their government not to mismanage or simply “misappropriate” (i.e. steal) their tax money.
> […] I believe the whole “tax evasion problem” in Greece is being used as a proganda tool […]
Oh no, tax evasion is well and truly thriving in Greece. Take simple receipts for services or goods for example. You will find that a very small proportion of receipts are issued by shops or workmen like electricians or plumbers. Instead, they may offer you a discount. It’s so endemic that prices for specific plumbing work are quoted “without a receipt” and if you ask for one you should expect an increase of up to 40%. If you ask for a receipt from a petrol station they will give you one of the ones they saved from before (ones that someone “suspicious” to be a taxman didn’t bother taking). People usually do not object as they are getting discounts and of course they don’t trust the government as I mentioned above.
I had this discussion with my step-father on why he should ask for receipts and his point was that there was no incentive to do that. He never made the connection between that money and the 90% discount on his medicines or anything else that the state does that somehow benefits him. Perhaps it’s the short-term, “live today” mentality of most Greeks, I don’t know. So, you at least have two kinds of people, the “what’s in it for me” crowd, and the ones that don’t trust politicians.
> […] the Greek government is deliberately and has been deliberately mismanaging the economy […]
I think it’s a combination of incompetence and corruption. However, the government is not just the elected politicians but the whole structure of the public sector. Some months ago an ex-tax collector (or something like that) revealed the now well-known 4-4-2 formula. To explain, tax officers are allowed to arbitrarily reduce tax-related fines to any amount they wanted. So if the fine was, say, 10 million euros they could reduce it to 10 cents. The usual practice was to reduce it to about 20% by accepting a 40% bribe. Hence, 4 for the tax officer, 4 for the individual and 2 for the state, i.e. 4-4-2.
Another individual was asked for 200,000 euros by people in the aptly named “Ministry of Development” for a 5 million grant to expand his tourist operations. It was explained to him in no uncertain terms that without this “incentive” his file would not leave the bottom of the pile.
And of course you also have the wider public sector. One example relates to doctors that gave out disability certificates like candy, resulting in 50% of the population of certain towns being registered blind or something. This would make a good joke: a secretary in the health ministry rang her superior to report that a person registering for disability brought all the relevant documents and when she couldn’t find one of them he pointed it out in the pile. “What’s wrong with that?” inquired the supervisor. “He was registering as 100% blind” replied the secretary. Another registered blind and was afterwards seen getting into his taxi parked outside and driving away.
[…] if I wanted to bring a country to its knees […] build up a massive bureaucracy […] and make their work inefficient and therefore keep their wages down.
Before a law passed in the 1920s or 30s each government that came into power would fire most of the public sector and bring their own people in. The aforementioned law established that jobs in public sector positions were permanent and eventually was made part of the constitution. This didn’t stop governments hiring more and more of their “own people”, resulting eventually in 1 million public sector employees. Of course, these people had to do something hence the extra red tape on absolutely every aspect of public bureaucracy.
> I can’t understand the Greek mentality. The property tax for example. People are not moaning about the fact that the government wanted to illegally cut off peoples power. Just that they cannot pay. […] If you can pay or not. People should be protesting on principle.
You can rest easy, not only they complained, they took the matter to Greek Justice and won. You can now pay just the electricity part of the bill and then the tax office has to chase you for the rest.
[…]
So who’s to blame for the situation Greece has found itself in? I struggle to find someone that is not guilty. Greek Politicians, obviously. Greek public sector workers, most of them definitely. Other Greeks, by association certainly (for agreeing to no receipts). EU “partners” for punishing instead of educating and helping (plus, Germans have made billions from this and still think the Greeks are milking them). ECB for not wanting to lose money over the welfare of the people they are supposed to serve. European leaders for their “solidarity” (yeah, thanks). Merkozy, for telling Greeks that they should have Estonian salaries but London prices. The IMF, for being the destroyer of worlds. The Americans, whose greed started the crisis. The banks for demanding bailouts (did they share their profits with us when they made billions and I missed it?)
Do Greeks deserve such pain? The ones that do are protected by the system, the majority doesn’t but get it on the neck anyway. Most countries are similar or worse sinners, I don’t see them being flogged as hard.
At least Greeks now know that they shouldn’t trust anyone to be a friend in need.