Picture the scene: a colorful Greek Taverna, with music playing and a group of locals enjoying plenty of red wine and traditional dancing, arms interlinked as they dance to raucous laughter. Suddenly, a call goes up from the lookout sitting on the front steps. The music stops. Cheap local flagons replace the French Margaux, and steak and chips are whisked away and replaced by olives, feta cheese and stale bread. The clients dash to the tables, faces long and forlorn as the tax inspector walks slowly into the bar, surveys the scene, downs a large glass of ouzo waiting for him and leaves without saying a word — or paying the bill. The locals look at one another, snigger quietly and then out comes the wine, steak and music as the dancing resumes.
A short time later, as the evening is getting into full swing, the phone rings shrilly, a harsh sound amid such merriment. The music stops abruptly, the dancers frozen as all eyes swivel towards the bar. The barman picks up the phone, and the locals listen to his side of the conversation.
“Hello?…. Aaahh Fritz, how are you? Nervous looks all around.”Not so good? The debts? Never mind the debts, what about the interest?…Yes, no problem Fritz, my dear fellow, the check is in the post, be with you tomorrow, or maybe the day after. Yes, guaranteed this time, no problem, I sold my grandmother, it’s on its way.
The barman puts down the phone as the room erupts into laughter, the music is turned up even higher and the dancing resumes.
How Far From the Truth?
Not fair on our Mediterranean friends? It may be a harsh caricature, but the fact remains Greece has been living way beyond its means and collectively is still failing to face up to its responsibilities. Greece is said to be indebted to European banks and institutions to the tune of Ã¢â€šÂ¬340bn (US$465bn, or 120 percent of GDP) but that tells only part of the story. Japan manages to service a higher level of debt as a percentage of GDP — the difference is, in Japan, people pay their taxes; in Greece, they don’t.
According to the Telegraph, tax evasion is a way of life in Greece. Ã¢â€šÂ¬15bn is said to go uncollected each year 4.4 percent of the total debt and under normal sovereign borrowing limits (4-5% interest rates), enough alone to service the country’s interest payments. But in a country where an estimated 2 million private sector workers carry the brunt of the tax load, a million public sector workers and 1.3 million self-employed escape tax. The government has published the names of almost 70 doctors it says have cheated the taxman and some surgeons are said to be earning Ã¢â€šÂ¬900,000 a year and not declaring tax.
“Only the stupid pay tax, one eye surgeon told Greek state radio only the stupid would go on air and say such a thing in any other country, but the very audacity of such a statement illustrates the scale of the problem. Tax income is estimated at about 50 billion euro in Greece, but there is said to be another 40 billion euro of unpaid taxes outstanding.
But is it just about taxes? Check back in and find out in Part Two.