Shortly after taking office as Greece’s new finance minister, Yanis Varoufakis announced ambitious plans.
When he visited Berlin at the beginning of February, he promised his German counterpart, Wolfgang Schäuble, that his government stood behind a “policy of reason” against tax evasion.
And Greek Prime Minister Alexis Tsipras underscored this by saying: “We are the first who want to stop tax evasion on a large scale.”
This part of the Syriza election platform found some sympathy in Germany, especially within the left-wing of the Social Democrats (SPD), Chancellor Merkel’s junior partner in the governing coalition, which is traditionally friendly to Greece. But almost no concrete action has followed those effusive promises.
Four months after Syriza’s electoral victory, the battle against tax evaders is practically non-existent. In 2010, France’s former finance minister, Christine Lagarde, now the head of the International Monetary Fund, compiled a list of account information regarding suspected illicit Greek accounts at the HSBC bank in Geneva. Almost five years later, it has barely been worked through.
In a letter to Joachim Poss, an SPD parliamentarian and expert on Europe and financial affairs, Mr. Varoufakis admitted that only 49 of the 2,092 cases have been examined, with a meager €31.3 million in back taxes being recovered.
The Greek finance minister tried to gloss over the meagre results with numerous promises.
The Greek government made clear that it has the political will to fight tax evasion at all levels and especially the tax evasion of the wealthy. Yanis Varoufakis, Greek finance minister
He wrote that the responsible departments were continuing a “thorough analysis in the most intensive way possible in light of the lack of auditing personnel.” In addition, “the Greek government made clear that it has the political will to fight tax evasion at all levels and especially the tax evasion of the wealthy.”
But actions speak louder than words. A real battle against tax fraud could rake billions into the state coffers. Experts estimate that tax authorities in Greece are being deprived of €30-40 billion per year. That would be the equivalent of 55 to 72 percent of last year’s tax revenues.
But Athens is far from having functioning tax authorities. The country is vigorously rejecting help from European partners. Three years ago, Mr. Schäuble offered to send 500 tax officials to Greece. Instead, only 10 worked there, according to a list from the finance ministry.
In Berlin, officials are disillusioned about Athens’ numbers on fighting tax evasion. Mr. Poss said Mr. Varoufakis' letter is “a document of the failure of Greek policies.”
During the debt crisis, images of the Greek tax authorities spread through the media showing mountains of dusty files, stored away in basements and stacked in hallways, and abandoned desks, which did not even have a telephone, let alone a computer.
There have been some nominal efforts to turn things around. With the help of an E.U. task force that is supposed to help the Greeks get their administration into shape, the number of finance officials has been reduced from 300 to 120, with the promise of more efficiency. Almost 99 percent of tax returns are done online.
The appeals procedures have also been tightened. Now 50 percent of tax debts have to be deposited, and the proceeding will be accelerated. As a result, the number of appeals has been cut in half.
Experts in Brussels estimate that the restructuring of the Greek financial authorities was progressing well until the beginning of June 2014, when Haris Theoharis, the general secretary for public revenue, who had been brought in to oversee the efforts to fight tax evasion, stepped down.
During his 17 months on the job, Greece reviewed the tax returns of about 300 rich individuals, resulting in fines of €80 million.
“He was simply too good,” said a high-ranking E.U. official. “He had the courage to go after the rich. And that made him unpopular.”
Despite all advances, 3.7 million Greeks are still €76 billion in debt to the tax authorities. Experts estimate that only €10 billion at best can be collected, because many of the debtors are broke or have long since died.
The finance minister now hopes that a generous system of payment in instalments will allow as many back taxes to be collected as possible. Those who make an initial payment can pay back the rest over 100 monthly installments.
Contrary to the original plan, this regulation also applies to tax debts of more than €1 million, which critics consider an unjust accommodation for rich tax evaders. Officials in the finance ministry argue that is the only way to reach the biggest debtors.
It is obvious that the rich are still being treated more gently. “You can’t investigate prominent businesspeople and companies without backing from above,” said a former Greek tax investigator.
There are reasons why there might be a lack of political will to do so. The major Greek business clans are well connected and have great influence over the management at the country’s television stations and newspaper publishers.
Alexis Tsipras did vow in the election campaign that he would force the “oligarchs” to pay. In fact, Leonidas Bobolas, CEO of one of Greece’s biggest construction companies, was arrested in April. He reportedly did not pay taxes on €4 million of his income. His name was on Lagarde’s list of Greek account holders at HSBC in Geneva. Mr. Bobolas was released after paying €1.8 million.
But it is not just an issue involving big fish. Costas Bakouris, head of Transparency International in Greece, said that tax evasion is “unfortunately socially acceptable” in Greece.
Most craftsmen say, “With or without a receipt?” when they are asked about the cost of a repair. One can also hope for a discount at the hairdressers, the dentist or the car repair shop by not asking for a receipt.
Tax evasion is also facilitated by the fact that many tax officials are corrupt.
A number of reform ideas for tax legislation, such as the value added tax, are currently being held up by negotiations with the country’s lenders, the euro zone, the IMF and the ECB.
Mr. Varoufakis is waiting for a green light for his plan for bringing capital that has fled back home. According to unofficial estimates from the finance ministry, wealthy Greeks have stashed €30-40 billion in Switzerland alone. Jacques de Watteville, the Swiss junior minister for international financial and tax matters, has been to Athens twice, most recently at the end of April. “The talks will continue,” was the succinct statement from the Swiss finance ministry in Bern.
Greece needs a program of voluntary declaration similar to those in Germany, France and Italy to deal efficiently with these Swiss bank accounts. If this option were available, the Swiss bankers would be required to either compel their Greek customers to submit a declaration retrospectively or end their banking relationship.
Mr. Varoufakis wants to lure the tax evaders now, with an amnesty: Those who declare retrospectively would avoid prosecution. Unlike in Germany, there would be no fines, but rather a tax rebate: A payment of 15 to 20 percent in back taxes would suffice.
Donata Riedel and Jan Hildebrand cover financial policy from Berlin. Gerd Höhler in Athens, Holger Alich in Zürich, and Ruth Berschens in Brussels contributed to this article. To contact the authors: [email protected], [email protected]