The FT has a report on the visit of the new Greek finance minister, Yanis Varoufakis, to the UK yesterday.
Three comments leapt out. The first was this:
[T]here is still deep scepticism in many European capitals, in particular Berlin, about the new government's brinkmanship and its calls for an end to austerity policies.
This was the second:
Mr Varoufakis said the government would maintain a primary budget surplus – after interest payments – of 1 to 1.5 per cent of gross domestic product, even if this meant Syriza, the leftwing party that dominates the ruling coalition, would not fulfil all the public spending promises on which it was elected.
And finally there was this:
Mr Varoufakis also said the government would target wealthy Greeks who had not paid their fair share of taxes during the nation's six-year economic slump. “We want to prioritise going for the head of the fish, then go down to the tail,” he said.
The net effect of these comments is that Greece will, even under a left wing government, run its country for the benefit of its creditors. However, the assumption that underpins its ability to do so is that tax evasion can be beaten. And the governments of Europe do not, or as likely, do not want to believe that.
If the EU wanted to solve this crisis Greece has very clearly offered the mechanism for it to do so. It can and will pay, it says, if it can. That is the best any creditor can hope for when they cannot liquidate the person who owes them money.
But the fact is that Greece needs help to achieve this goal. That help will come in the form of the technical aid, and maybe long loan of personnel, required to help the Greek government collect the tax that is owed to it.
I have seen no mention of this issue of assistance to achieve this goal in any report, so far, but it seems to me that it is absolutely central to the debate to be had. Unless and until it is acknowledged that Greece (and other countries) need help to collect tax owing, and that a new international consensus to beat tax evasion is at the heart of making our economies work again, then progress on Greece, and on Spain and other countries to come, will not happen.
What is that technical assistance that is needed? First, a proper evaluation of the tax gaps of these countries is essential.
Then an analysis on an individual country basis of why the gap is occurring needs to be undertaken so that an effective plan to tackle the issues can be prepared.
At that point it is likely that technical assistance from other authorities with experience of tackling evasion may well be needed: a cross fertilisation of ideas is vital.
So too though is the loan of personnel. Sometimes it is essential that people from outside a country help it in the process of transforming a tax system to collect the tax owing. The reason for that is simply stated: outsiders are harder to corrupt in these situations because the do not face the same risk of future retribution for the actions they take.
There is, then, an answer for Greece, and it call comes down to tax. The question to the ECB then is now about whether or not it will help Greece collect the tax owing to it, or not. It's a straightforward question requiring a straightforward answer. I would love to think that the ECB will supply one, but that may be far too optimistic of me.
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I wonder if there is a European country with a lot of experienced Revenue staff retiribg early, made redundant, or maybe feeling a bit undervalued, who’d be happy to help out in return for for spending their sixties in the Mediterranean sunshine?
Ahh, I wonder which country that might be?
The Revenue staff woiuld have new lease of life working for a Government that actually wants to do something about its tax cheating Oligarchs the rest of the 0.1% rather than one that spouts a lot of noise and hot air, but doesn’t actually do anything effective. No prizes for guessing which Government that might be!
If ever there was a case for a windfall wealth tax a là Danny Dorling, it is this.
Oops, me accent slipped.
From the EC’s report “The Second Economic Adjustment Programme for Greece
Fourth Review — April 2014” (page 65):
“Greece is receiving technical assistance coordinated by the European Commission’s Taskforce for Greece and provided by the Commission, Member States, the IMF, the OECD, the World Bank and other technical assistance providers. Technical assistance (TA) concerns several areas which are crucial for the success of the programme. Major contributions include work in fields such as tax policies, the reform of the revenue administration and the fight against tax evasion, social welfare, public financial management, public administration reform, the acceleration of cohesion policy projects and a wide range of projects to improve the business environment in Greece.”
See also pages 30-34 of the same report, setting out what Greece is doing to strengthen its tax system, internally as well as with outside assistance; and pages 191 onwards with even more detail including a specific section on tackling evasion (p198).
I am aware of that
More is clearly needed
And there is no reference to the tax gap, please note
There are repeated references to the difference between expected tax and cash collected.
It seems odd to say that no report mentions Greece getting assistance, when what you mean is that not enough assistance is being given.
When you say “more is clearly needed”, what are you basing that on? I’d have thought that changing a large bureaucracy (and perhaps a country’s attitude to paying tax) might take more than a year or two to organise, much less achieve, so expecting a clear turn-around in a few years might be a little ambitious.
My opinion
My discussions
Observation
These inform my opinion
These inform my opinion
Go read
You are relying on the paperwork
This refers to the reality
And therefore the relevance of what I said
http://www.ft.com/cms/s/0/f81e0b82-aad9-11e4-91d2-00144feab7de.html?ftcamp=crm/email/201524/nbe/Comment/product#axzz3Ql0BbeXl
Carol. The accent usually looks better the other way round on the ‘a’. Presuming she’s spelled “Danni(elle) of course”
Au revoir.
Quite clearly the new Government is walking a tight rope even though its stance seems quite reasonable to me (that is to say that it needs to invest -spend – to save if its tax raising powers are to be fully effective).
Wouldn’t it be nice of the IMF or World Bank leant the new Government staff to deal with tax evasion instead of just grabbing public assets to sell off?
I still think it is shocking that a country can be left to fall (if indeed Greece does) yet the big financial institutions (the originators of chaos) were mostly propped up by us.
Steve Keen was on Channel 4 News last night full of praise for the Greek Finance Minister. I hope the gentleman pulls it off because if Greece goes, we could all technically go under looking at the levels of private as well as public debt there is in the Eurozone.
If Greek does fail it will be the coup de grace for the concept of democracy IMHO.
Agreed
This is interesting to anyone well-informed on Greek tax affairs:
http://europa.eu/rapid/press-release_MEMO-14-495_en.htm
It says this:
Strengthening revenue administration
Support for the sound functioning of the revenue administration and public financial management is crucial both to enable the Greek authorities to increase public revenues and also to deliver a fairer distribution of the tax burden. TFGR, together with the European Commission’s Directorate-General for Taxation and Customs Union (DG TAXUD) and the IMF, has continued to provide technical assistance to help the Greek authorities in this regard and to preserve the benefits of the recent achievements in public finances.
Overall, the Greek tax administration had achieved good progress, both in tax administration, with the adoption of a Secretary-General decision outlining the new organisational chart, and in terms of core business processes, especially regarding results in debt collection and VAT returns.
Three additional international resident experts, recruited under a contract with the European Commission and administratively supported by the TFGR, started work assisting in the tax administration. Technical assistance was also stepped up in the area of VAT, including reviewing VAT legislation and strengthening the fight against VAT fraud. Work is expected to progress in the area of auditing high-wealth individuals and the high-income self-employed.
Compare and contrast with this:
At that point it is likely that technical assistance from other authorities with experience of tackling evasion may well be needed: a cross fertilisation of ideas is vital.
So too though is the loan of personnel. Sometimes it is essential that people from outside a country help it in the process of transforming a tax system to collect the tax owing. The reason for that is simply stated: outsiders are harder to corrupt in these situations because the do not face the same risk of future retribution for the actions they take.
There is, then, an answer for Greece, and it call comes down to tax. The question to the ECB then is now about whether or not it will help Greece collect the tax owing to it, or not. It’s a straightforward question requiring a straightforward answer. I would love to think that the ECB will supply one, but that may be far too optimistic of me.
Yes
And as I pointed out, they are not doing anything to even calculate a tax gap
So as I also pointed out they have a long way to go as yet
Which is precisely why I said it
And I happen to think 3 experts may not be enough
Your problem is?
I find the situation quite bizarre,
given that the primary responsibility of the ECB is the stability of the currency, and that the constant threat to that stability is the precarious nature of the economies of Greece, Spain, Portugal and Italy. A crime that undermines the economies of those countries therefore undermines the stability and, by extension, the ongoing feasibility, of the single currency itself (Not to mention its ramifications for other areas of concern for the EU, such as organised crime and people trafficking). That the resources necessary to tackle tax avoidance have not been instantly forthcoming beggars belief.
I cannot imagine a private sector corporation that would behave in such a way as to allow subsidiary elements of its organisation to be compromised to a degree that threatens the whole structure.
But then every tenet of the Neo-liberal orthodoxy ends in an irreconcilable paradox when subjected to logical scrutiny. But only if you view it from the perspective of a model of independent sovereign democracies.
This issue was predicted by Wynne Godley in the early 90’s -no one took him seriously>
See:http://www.economonitor.com/blog/2012/09/wynne-godley-and-the-eurozones-eventual-sovereign-crisis/
Thanks Simon, pretty much sums it up.
Richard, if you had any experience of living in, or doing business with Greece, you would realise that the involvement of consultants from abroad is futile. There is a specific national psyche in Greece which can only be understood by those born into it. Their entire rationale, thought processes and articulation is so different to ours, that it is virtually impossible for anyone from, say, Northern Europe to provide consultation in any meaningful way. Well meaning advice will be misinterpreted, manipulated, ignored or wrongly applied; and the consultants will come away disillusioned and concussed from constant impact with a brick wall.
Strange then that these really stupid people elect a government like Syriza whilst we elect tories who are so very good for us.
I am sorry but I do not buy that
I would accept it if the past- governments did not want the tax collected
This is different
You are simply saying change is not possible. I do not believe you
Excuse me but tax dodging is a world wide behaviour and is seen everywhere – to point a finger at Greece (just one country) is like the teapot calling the kettle black.
It also manages to help avoid discussing the fact that one of the problems in all economies at the moment is the reduction in pay in the workforce and even in social security systems that has been creeping up even in Germany for many a year.
This reduction in pay has meant less real money being saved and more DEBT in the system being produced so there is in actual fact no money for a rainy day – a rainy day like 2008’s crash.
Name me a country in the Eurozone whose people aren’t reliant on credit? Most of the big players are.
If Greece falls, then there’s nothing stopping the rest of us either which is why we need an ECB that is controlled by those who elect the Euro MPs (us) – not a closed shop ran by the banking fraternity who will only ensure that any solution embeds them and their aims and objectives of making money out of it.
With some experience of this country I do agree that more could be done re tax collection. But there is a limit. Greece is not UK by- the- Med. The country is at basic fundamentally poor (in material terms). However the population have aspiration to Western European living standards. In the end if Greece is to be part of Europe, then Europe has to subsidise it.
True
The reason no help is offered is political and political alone!
If the new government fails to raise the taxes it hopes, and lets face it, this is very likely, then the German / EU politicians do not want to have any Greek excuse that it was because of EU tax collectors or methods, the failure must be Greek and Greek alone.
In addition sending EU personnel in to chase tax in large Greek companies would be very incendiary…………all in all best left to the Greeks even if less is recovered.
For once I almost agree with you – at least on the motives for the 2nd para
There are, as I understand it, inherent problems with Greek membership of the European Single Currency.
When I first travelled to Greece (in the mid 80’s) the country had little organised manufacturing industry, a slightly outdated agricultural sector and problems with tax collection largely owing to the geographical nature of the country (227 occupied islands!). The answer to this was to impose very high import tariffs (a friend who was a native of Corfu had just purchased a BL Mini Metro at about £13,000 otr, just about double the price in the UK). Much of the extensive shortfall, I was given to understand, was made up through that import taxation, a concept that would have been lost under the free trade conditions of the single currency.
Moreover, much of the appeal of the Country’s then thriving tourist industry was based on the comparatively low cost of living, which made Greece very competitive as a holiday destination. With Greece’s accession to the Euro that advantage disappeared virtually overnight with neighbouring Turkey supplanting it in the affections of the tourist industry. (Ironically Turkey, a non-member state has received hundreds of millions, if not billions of pounds in EU subsidies in order to help it modernise sufficiently to join the Union, an aspiration that looks increasingly unlikely with every passing year).
If my understanding is correct it begs the question as to how Greece could ever have been expected to survive, let alone thrive under the conditions of monetary union.
All totally fair questions
But the neoliberal dogma did not suggest them to those who should have asked
Absolutely Richard. In fact I would go much farther.
The wilful blindness displayed by those tasked with facilitating Greek accession suggests a far more sinister possibility.
Could it be that the inevitability of the economic failure of Greece, and the subsequent loss of sovereignty was viewed as a win-win by the architects of the European Neo-liberal agenda?
There is little, after all, in TTIP to suggest that they believe in the democratic rights of member states…
Wolfgang Schauble’s intransigence certainly suggests a determination (even in the face of the fact that austerity is killing the patient) to deny the sovereign rights of the Greek electorate.
It seems that EU enlargement agenda was one pursued at all costs – seems like the chickens are coming home to roost.
Some of you may be interested in this petition for debt justice for Greece, organised by European Spring:
http://www.europeanspring.org/debtjusticegreece