Tax evasion and corruption in Greece

Alleged origin of Greek corruption

Commentators both within and outside Greece have attributed this flaw in Greek culture to a mismanagement of Ottoman Greece by the Ottoman Empire. In Ottoman-occupied Greece tax resistance became a form of patriotism, and sometimes a condition for survival. Property and commercial tax systems were left in shambles. Greece became independent in 1822, but the corruption in modern Greece and the resistance to pay taxes to Ottoman Empire Era is connected by the fact that part of the ethnic Greek officials of the Ottoman Empire kept their positions after Greek independence and established the way the Greek state was run. Immediately after independence, Greeks were subjected to a heavy tax burden caused by the debt accumulated during the independence war, which was combined with the poverty and devastation caused by the war. Tax evasion was, however, a larger problem among the high-ranking officials, which were accustomed to being unchecked by the Ottomans and sought to preserve that status in the Greek state.

Extent of Greek tax evasion

The OECD estimated in August 2009 that the size of the Greek grey market to be around €65bn (equal to 25% of GDP), resulting each year in €20bn of unpaid taxes. This was in comparison almost twice as big as the German black market (estimated to 15% of GDP).

There is however a correlation with the percentage of Greek population that is self-employed (31.9% in Greece vs. 15% EU average), as several studies have shown the clear correlation between tax evasion and self-employment.

Several successive Greek governments had in the past attempted to improve the situation. A rapid increase in government revenues through implementing a more effective tax collecting system has been recommended. Implementing the proper reforms, is however estimated to be a slow process, requiring at least two legislative periods before they start to work.

In the last quarter of 2005, 49% of the companies inspected by the tax authorities were found to have committed tax offences while in January 2006 it fell to 41.6%. A study by researchers from the University of Chicago concluded that tax evasion in 2009 by self-employed professionals alone in Greece (accountants, dentists, lawyers, doctors, personal tutors and independent financial advisers) was €28 billion or 31% of the budget deficit that year.

The Tax Justice Network has said that there are over €20 billion in Swiss bank accounts held by Greeks. The former Finance Minister of Greece, Evangelos Venizelos, was quoted as saying "Around 15,000 individuals and companies owe the taxman 37 billion euros". Additionally, the TJN puts the number of Greek-owned off-shore companies to over 10,000.

Fakelaki

In Greek, fakelaki means "little envelope" but is also used in Greek popular culture as a jargon term referring to the bribery of public servants and private companies by Greek citizens in order to "expedite" service. According to this practice, sums of money are stuffed in the files and passed across the desk to secure appointments, documents approval and permits. The term was mainly associated with the corruption amongst the doctors of the National Healthcare Service (ESY).

Government efforts at revenue collection

Following similar actions by the United Kingdom and Germany, the Greek government is in talks with Switzerland to tax bank accounts in Switzerland owned by Greek citizens. The Ministry of Finance has revealed that Greek Swiss bank account holders will either have to pay a tax or reveal information such as the identity of the bank account holder to the Greek internal revenue services. The Greek and Swiss governments are to reach a deal on the matter by the end of 2011.

Anticorruption measures

The Inspector General of Public Administration has started an online census of civil servants. In connection with this census he has uncovered a number criminal offenses, including an entire non-existent health authority.

Tax collection improvements

In 2010 the government has implemented a tax reform. The year 2012 saw the introduction of a duty of non-cash payments for amounts over 1,500 euros.

The Greek police have established a special unit, which deals exclusively with tax offenses. Germany has offered experts from its financial management and tax investigation office to help build a more efficient tax administration. However, months later it was not clear whether Greek officials would accept the offer.

In November 2011, the new Greek finance minister Evangelos Venizelos called upon all persons who owe the state more than €150,000 to pay their outstanding taxes by 24 November or find their names on a black list published on the Internet. The government later revealed the list, which also includes a number of prominent Greeks, including pop stars and sportsmen.

Forokarta

The Forokarta is a "tax card" proposed by the government of Greece in August 2011, which would be used to facilitate collection of receipts for purchases; this would allow the Greek finance ministry to clamp down on rampant tax evasion by comparing individuals' spending to their income, and by comparing business' actual revenues to their accounts. As of 2015, this measure is largely defunct and can be considered a failed project.

Lagarde list

The Greek government has not completed an investigation of a list of 1,991 persons purported to hold accounts with Swiss bank HSBC that it received in 2010 from former French finance minister Christine Lagarde. Initially, officials claimed at various times to have lost or misplaced the information. On 29 October 2012 the government changed its position saying it would not use stolen information to prosecute suspected offenders. Instead, Greek authorities arrested Kostas Vaxevanis, journalist and editor of the weekly magazine Hot Doc, who published the "Lagarde list". He was charged for breaching privacy laws that could have seen him sentenced to two years in prison. However, after a trial lasting only a day, he was acquitted.

The list includes an advisor to former Greek prime minister Antonis Samaras, as well as a former minister and a member of Samaras' New Democracy political party. The list also contains the names of officials in the finance ministry.

Mr Vaxevanis said he thought the government had not acted on the list because it included friends of ministers, businessmen and powerful publishers. He also accused much of the Greek media of ignoring the story. "The Greek press is muzzled", he said. "There is a closed system of power in Greece, wielded by the political elite, businessmen and journalists."

Corruption cases