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Greece: Playing cat and mouse with tax evaders
Athens News ^ | 12/15/2011

Posted on 12/15/2011 11:42:11 PM PST by bruinbirdman

Nikos Lekkas' team of tax investigators knew they were on to something when they found that a humble farmer on the island of Thasos owned a red Ferrari and a Porsche.

Intrigued by how a farmer who had declared just 100,000 euros in income over the past decade could afford such luxuries, Lekkas dispatched an undercover tax agent to the northern Aegean island.

The agent was back soon, not only was the Thasos "farmer" earning far more than he had disclosed to the state, he was in an entirely different line of business: loan sharking.

Greece is now close to a deal to seize 10m euros from the man, says Lekkas, the no. 2 official in the newly relaunched Financial and Economic Crime unit (SDOE). He proudly points to the case as one of many signs that the country is finally serious about hunting down tax cheats and making them pay up.

"Earlier there was no political will by governments to get to the bottom of this", Lekkas, a tax veteran at 59, said in his office near Piraeus.

"Now that we've reached the edge of the cliff, they've decided to implement measures against tax evasion."

As Lekkas says, the government has little choice. Kept afloat only by bailout loans, it must convince lenders that it is capable of filling depleted state coffers with tax income as part of reforms to get finances back on track.

Rampant dodging is one of the reasons why a popular tourist destination that enjoyed an economic boom in the early 2000s stumbled into a debt crisis that has since sucked in larger economies like Italy and threatens to break apart the eurozone.

In the midst of the country's languid beaches, ancient ruins and craggy mountains is a thriving shadow economy that accounts for about 28 percent of the 220bn euro economy, the highest proportion in the euro zone. Annual tax evasion is estimated at 40-45bn euros, says Lekkas.

Citizens joke that cheating the taxman is the national sport.

Politicians made us evaders

Just a few blocks away from the finance ministry where European Union, European Central Bank and International Monetary Fund troika inspectors discuss reforms, illegal immigrants hawk fake watches and handbags in plain view along a busy shopping street.

Down a narrow side street, Dimitris, a stocky 59-year-old in tattered overalls lights a cigarette inside his dingy souvlaki shop and begins a rant. Why should he be honest when he sees politicians milking the state for millions.

"Politicians have made us tax evaders. Why should we follow the law when they are stealing? Let the politicians and the rich lead the way."

A year ago, tax inspectors in plain clothes showed up at Dimitris' shop and slapped him with two 300-euro fines for two missing receipts, they had counted the number of seated customers and compared that to the number of receipts issued.

After 35 years in the business, Dimitris now duly prints out a receipt for each customer. But he remains unrepentant, and has figured out another way to make up for the shortfall: making smaller pension and social security contributions for one of his employees by recording just half the hours worked.

"There are other tricks to evade taxes," Dimitris said, puffing away on his cigarette despite laws against smoking in public places.

"You can pay lower contributions for your staff, for example, or issue other receipts with lower value added tax."

Down a street selling T-shirts and tacky souvenirs near the ancient Acropolis, a deli shop owner pockets money for bottled water without any mention of a receipt.

Nearby, shop assistant Yiorgos recalls how he worked as a waiter for months earning a pittance off the books. As a 20-year-old hunting for a job in a country where nearly one in two youths are unemployed, he was paid 550 euros a month without any welfare contributions by his employer.

"I knew there was no hope of anything else," he said. "When you're young, that's what they tell you they will offer you."

On the other side of town in a residential suburb, car mechanic, Yannis offers a familiar story of evasion so widespread that it is the norm, and anger at corrupt politicians and punishing tax hikes that heap new burdens on the average citizen.

"Everyone in my line of work evades taxes," the 49-year-old said. "We are not fools to obey the law when politicians are stealing."

He says his customers themselves ask for his services without a receipt so they can pay less.

"If I were to be 100 percent legal, I would have to shut my shop," Yannis said.

Starting from zero

Signs of change are slowly beginning to appear, however.

Over the past month, citizens watched in surprise as a top plastics company executive, a construction firm CEO and a fashion designer were hauled away in handcuffs for tax evasion.

The arrests by Lekkas' unit and police were unprecedented. Lekkas notes that his agency carried out 16 arrests in the last 25 days, compared to a grand total of zero in previous years.

Although his agency has technically had the power to make arrests since 1995, it took the prospect of a debt default and an exit from the eurozone before the law was beefed up to make it easier to carry out arrests quickly, Lekkas says.

Even more significantly, Lekkas says no one has interfered with his work in the year he has been at the agency.

"I've never gotten a phone call from a politician or a minister to cover up a case," he said.

In between barking orders to agents on the phone, Lekkas speaks animatedly as he rattles off his unit's successes in the past few weeks as a new electronic system allowed investigators to cross-check tax filings with property records and bank data.

In one case, investigators found a doctor in an upscale Athens suburb had reported income of 200,000 euros over the last seven years but stashed 5.5m euros in his bank account, most of which will now be seized by the state.

In another case, a foreign multinational company was pressured into striking a deal to pay 20m euros of the 35m euros it owed the government, he says.

Spurred by the spate of recent arrests, 17 others with tax arrears rushed to pay up a total of 5.6 million euros to avoid jail, says Lekkas.

"Our goal is to win the war against tax evasion," he said. "We Greeks like to win and we will win."

Purely symbolic?

Victory, however, is still a good distance away.

All those arrested over the past month have been released pending trial.

One of them, Leon Levis, the owner of fitness firm BodyLine, was sentenced to three years in jail for owing about 620,000 euros but was allowed to avoid prison by paying 10 euros a day for the duration of his sentence, 11,000 euros.

The To Vima daily wryly summed up the state of affairs with: "Big name arrests, but bread crumbs for state coffers".

"The impact of the recent actions is purely symbolic," said Dimitris Karantinos, director of research at the National Centre of Social Research (EKKE), pointing to a slow pace in the judicial system. "It takes a long time to see something done. And it takes 10 years to clear up a case."

The European Union taskforce on Greece says the tax dispute system is weighed down by a backlog of 165,000 cases representing about 30bn euros in unpaid taxes, made worse by the fact that they are usually tied up for seven to 12 years.

The taskforce estimates the Greek state is owed a total 60bn in tax arrears, worth over a quarter of GDP, but only 6-8bn euros of that is considered "collectible".


TOPICS: Business/Economy; Crime/Corruption; Foreign Affairs; News/Current Events
KEYWORDS:

1 posted on 12/15/2011 11:42:17 PM PST by bruinbirdman
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To: bruinbirdman
Nikos Lekkas' team of tax investigators knew they were on to something when they found that a humble farmer on the island of Thasos owned a red Ferrari and a Porsche.

Pretty snazzy rides for 'farm vehicles', but not enough ground clearance for these parts...

2 posted on 12/16/2011 12:34:29 AM PST by Smokin' Joe (How often God must weep at humans' folly. Stand fast. God knows what He is doing)
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To: bruinbirdman

socialist utopia:

one wonders how long it will take for the ferrari and porsche to be redistributed from the farmer to the corrupt politician...


3 posted on 12/16/2011 3:08:17 AM PST by JohnLongIsland
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To: bruinbirdman
not only was the Thasos "farmer" earning far more than he had disclosed to the state, he was in an entirely different line of business: loan sharking.

Greece is now close to a deal to seize 10m euros from the man, says Lekkas, the no. 2 official in the newly relaunched Financial and Economic Crime unit (SDOE). He proudly points to the case as one of many signs that the country is finally serious about hunting down tax cheats and making them pay up.

So the Greek government's problem with loan sharking is the tax evasion aspects of it? Muggers could be model citizens if they cut the government in on their stolen loot.

4 posted on 12/16/2011 3:46:18 AM PST by TimSkalaBim
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To: bruinbirdman
"There are other tricks to evade taxes," Dimitris said, puffing away on his cigarette despite laws against smoking in public places.

The Italians invented double column bookkeeping....

The Greeks invented triple bookkeeping....

One copy for me

One copy to show spouse (sans funny money for mistress)

Last version for the tax man. (but he sometimes gets a cut of the funny money)

5 posted on 12/16/2011 7:42:57 AM PST by spokeshave
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