October 22, 2010

Greece and it's legendary powers of tax evasion

Vanity Fair article by Michael Lewis takes Greece to task on many fronts, not the least of which is a sort of legendary ability for Greeks to beat the government on tax collection:

"The scale of Greek tax cheating was at least as incredible as its scope: an estimated two-thirds of Greek doctors reported incomes under 12,000 euros a year—which meant, because incomes below that amount weren’t taxable, that even plastic surgeons making millions a year paid no tax at all. The problem wasn’t the law—there was a law on the books that made it a jailable offense to cheat the government out of more than 150,000 euros—but its enforcement. “If the law was enforced,” the tax collector said, “every doctor in Greece would be in jail.” I laughed, and he gave me a stare. “I am completely serious.” One reason no one is ever prosecuted—apart from the fact that prosecution would seem arbitrary, as everyone is doing it—is that the Greek courts take up to 15 years to resolve tax cases. “The one who does not want to pay, and who gets caught, just goes to court,” he says. Somewhere between 30 and 40 percent of the activity in the Greek economy that might be subject to the income tax goes officially unrecorded, he says, compared with an average of about 18 percent in the rest of Europe.

The easiest way to cheat on one’s taxes was to insist on being paid in cash, and fail to provide a receipt for services. The easiest way to launder cash was to buy real estate. Conveniently for the black market—and alone among European countries—Greece has no working national land registry."

The entire, long article is a bit of "financial-disaster tourism" (self-proclaimed by the author) who finds amusement and astonishment at how he perceives Greece to operate, or that is, not operate. How far along Lewis goes with the story-arc is shown here:

"Prime Minister Papandreou presented this bill, as he has presented everything since he discovered the hole in the books, not as his own idea but as a non-negotiable demand of the I.M.F. The general idea seems to be that while the Greek people will never listen to any internal call for sacrifice they might listen to calls from outside. That is, they no longer really even want to govern themselves."

The last sentence reverses the writer's own direct conclusion from off the shoulders of official Greek government onto the protesting, varied but angry groups in the streets. It is too convenient an idea, and hurls everyone and everything into a single bucket of irresponsibility to which an outsider, like an American writer, can too easily shower contempt. I get the sense the writer was too overwhelmed by it all, especially the excellent and interesting profile of the Vatopaidi monastery, a success story in capitalism too odd to just be funny (though it is), and maybe a microcosm of the Greek dilemma.

Well-worth reading, from the October 2010 issue of Vanity Fair Magazine.

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