July 30, 2010

Tax enforcement destroying the "shadow economy"

The black market of sales and income which has long operated under the table in Greece is getting hammered by the recently empowered offices of tax collection and enforcement. Article by Doug Saunders at the UK Globe and Mail describes the difficulty of the change in how business is being done in Greece:

"Electrician Christos Papanikolaou, 52, pulls out his own nightmare ledger, topped with a letter from the government stating that it wants him to pay three years worth of health-insurance contributions he had ignored because nobody had bothered asking for them. The total: almost €10,000. “My company is losing money, but now that I owe all this, I can’t even afford to go out of business and retire,” he says.

Outside the closed circuit of Greece’s state-dominated economy, however, there is a quiet mood of optimism in many corners. The reforms seem to be creating a genuine economy, some say, where before there had been only an illusion.

“In a funny way, I am quite optimistic about what is happening right now in Greece – it’s almost like a cleansing exercise, where the government has found the will that it lacked for so many years,” says Marcos Varemis, whose online-marketing company, Upstream, employs 136 people. “I think this sobering-up effect is going to be very beneficial for the country.”

Most of the article is a series of anecdotes describing the hardship of suddenly owing a great deal of money in back taxes. An ancillary attitude, though, is that it is setting the stage for a strong comeback for entrepreneurial Greeks who have previously been at an unfair disadvantage in a system dominated by government connections and a almost invisible system of corruption.

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