Who Will Collect Greek Taxes?

There is a problem with tax collection in a country that has instituted austerity measures while simultaneously trying to attack tax evaders, and that is there may be no one to collect the money owed the government. Greece now faces this problem.

The European Commission has pressured Greece to force its citizens to pay more of the taxes that they owe to the central government. The New York Times reports, “There is a backlog of 165,000 pending tax cases, some more than a decade old, representing about half of the total arrears of 60 billion euros ($81 billion).” Greece’s deficit situation would change considerably if that money quickly moved into its treasury.

Tax evasion is hard enough to combat in countries like the U.S. The IRS is fairly well-funded. It uses systems developed over many years to detect tax cheating at both the business and individual level. But most analysis of American tax collection efforts suggests they are mediocre and that tens of billions of dollars are owed the Treasury. The pressure to make tax payments is severe because of large penalties often levied by the IRS.

The Greek government is in disarray. Most economists believe the new cabinet will need to propose a reduction in public sectors jobs that will number well into the tens of thousands. That reduction may well affect the Greek tax office.  Tax collectors, judges and auditors could lose their positions. The Greek government’s ability to detect and collect unpaid taxes — in a nation in which tax evasion is an art developed over many generations — will be compromised.

The EC may want Greece to step up its tax collection activity, as the agency correctly believes the amounts due are huge. However, Greek government spending reductions will include a broad range of job eliminations. Few departments will be saved from that — the tax bureau included.

Douglas A. McIntyre