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Greek Certainties: Death, Taxes and Tax Evaders

“I’m moving to Greece. I won’t have to pay any taxes at all!”

Raising taxes is supposed to be antithetical to Republicans and Greece’s New Democracy Capitalists who usually pin that on Democrats and the Left.
But it wasn’t surprising when, instead of going after tax evaders who owe their beloved country $70 billion but hide their money in secret bank accounts in Switzerland, Singapore, Luxembourg, Lichtenstein, the Cayman Islands and other tax cheat havens around the world, Prime Minister Antonis Samaras decided to tax the middle class – and some businesses too – into near-extinction.
Breaking yet another vow, this one to defend the middle class of Greece under siege for nearly three years with pay cuts, tax hikes and slashed pensions, the wobbly coalition government led by Samaras’ New Democracy party pushed through Parliament a tax “reform” bill that assesses a rate of 42 percent on those earning 42,000 euros ($56,000) and raises the corporate tax rate from 20 to 26 percent.
The Wall Street Journal, the favored reading of Republicans, Conservatives and Samaras defenders, dubbed it “tax insanity,” so it will be curious to see what the Samaras lovers say about this one as their guy sold them down the river too. They’ll say he was forced to do so by Greece’s international lenders, the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) so that Greece could keep getting money to prop up an economy destroyed by alternating administrations of New Democracy and the PASOK Socialists, so there’s plenty of blame on the left and the right.
New Democracy’s philosophy is much like American Republicans whose motto is “Deliver the mail, defend the shores and stay the hell out of our lives,” and both are anti-tax and pro-business, so when did Samaras become a Leftist and become pro-tax and anti-business? He’ll come to find, as Shakespeare wrote, that, “Politics is a thieves game and those who stay in it long enough are bound to be robbed,” but for now he’s robbing not just the middle class – the people who consume, buy white goods and appliances and electronics and all the stuff sold by rich companies who need customers – but the businesses too.
There’s another delicious loophole in the new tax code. Only late in December, 2012, after changing its position more often that Weathervane Samaras does did Greek tax officials warn taxpayers that unless they produce receipts equivalent to 25 percent of their income that they could face a 22 percent surtax on the difference.
That brings the effective tax rate for many in the middle-class to 64 percent, which might seem sweet if you live in France where Crazed Leftist Francois Hollande wants to tax people who earned their wealth at 75 percent, but for many Greeks it’s an economic death sentence because that’s just the income tax and they have to pay a doubled property tax and now electric bills are going up 15 percent, except for government agencies who don’t have to pay their bills and pass them on to actual taxpayers.
Maybe Samaras can give Greek citizenship to Gerard Depardieu, who’s seeking Russian citizenship to escape France’s lunatic tax rates. The Greek leader can have a poster boy and boast that Greece’s tax rate is at least lower than France’s. Because Depardieu is rich and famous he can play cards with politicians and the fellow rich and discover he can pay no taxes at all! But he’d better get it in writing because Samaras’ promises aren’t worth the drachmas on which they’re written.
Samaras you may remember was opposed to austerity before he supported it then opposed it then supported it and is also the guy who promised small bondholders who got stiffed in the Greek debt write-down that he would get their money back then forgot they existed.
Taxes are needed in a civilized country so the mail can be delivered, the shores defended, and to provide schools, hospitals, roads and services that people need, but there is a law of diminishing returns too as the austerity measures Samaras loves so much have shown. Don’t take my word for it. Olivier Blanchard, the chief economist at the International Monetary Fund – an agency to the right of John Birch – said the austerity measures it demanded in return for joining with the European Union and European Central Bank to bail out Greece have backfired.
That’s what economists never learn because they learn Economics as undergraduates, graduate students and get their doctorates but most have undoubtedly never had to balance a checkbook or leave a classroom to see what’s going on in the street. But you don’t have to go to the London School of Economics or Harvard Business School to know that when you cut people’s pay at the same time you are raising taxes that the two eventually meet and you have a zero net gain – or even a loss.
That’s been proved by the great equalizer: math. Greek tax revenues are far off projections because the government keeps imposing austerity without raising revenues from other sources, such as Foreign Direct Investment, which the IMF said fell by some 60 percent from 2008 – the year before former PASOK Socialist leader and then Prime Minister George Papandreou went begging for loans – to 2010, when it was only 0.32 percent of Gross Domestic Product (GDP) and sliding.
In competitiveness, the World Economic Forum (WEF) for 2012-13 lists Greece at 96th, behind the likes of Mongolia, Namibia, Albania, Moldova, FYROM, Botswana, Romania, Vietnam, Sri Lanka, Bulgaria, Chile, Iceland, and Brunei. So what’s Greece’s motto for attracting business: “Hey, We’re ahead of Tajikistan!”
At the same time, Transparency International says Greece is the most corrupt country in Europe, even worse than Italy, where the Mafia runs almost everything. And if you want to attract business, you need educational institutions that are better than correspondence courses off matchbox covers, which many of Greece’s universities amount to, according to World University Rankings which listed only one – the University of Crete – far down in the list of the top 400.
Since the austerity insanity began (if Papandreou had fired 150,000 workers three years ago and put them in training to be hired by private companies that Greece could have lured with lower tax rates and collected overdue taxes none of this would have been necessary) Greece’s debt has gone from 120 percent of GDP to 190 percent. Maybe an economics major can say if that’s good or not.
Meanwhile, Greece’s largest company, Coca-Cola Hellenic, tired of tax increases and as greedy as a New Democracy Conservative but not as lazy as a Leftist loony, is leaving Athens for the tax haven of Switzerland where it will find plenty of company with Greeks hiding money in banks there.
The patriots of Fage, one of the major players in Greek dairy cartels that charges more for yogurt in Greece than in some other countries where it distributes, are leaving Athens for Luxembourg, and the new tax plan will have the moving vans backed up at more companies in Greece, joining the thousands moving to other countries, including Bulgaria, where the tax rate on businesses and on income is a flat 10 percent. Maybe Samaras’ economic advisors can calculate if that’s higher than 26 and 42 percent on Greek income and businesses.
Coca-Cola’s departure has cut the value of equities listed in Athens to about $31 billion from $39.2 billion, according to Bloomberg, making it smaller than ….. Vietnam. It also makes Greece the smallest among 24 developed markets traced by the agency, and there’s one major reason why: taxes.  While Greece’s economy is shrinking by about 4.5 percent of GDP, Bulgaria’s is growing by about 1.5 percent. Worse for Greece, Turkey – where the income tax rate is still 20 percent – is expecting 4 percent growth.
The Journal wrote that, “We keep hearing that Greece needs to make its economy more competitive, which is true. But it won’t do that by making its tax code more punitive. Greece needs to break out of the EU-IMF austerity trap,” recommending a flat tax rate.
That can be regressive and counter-productive but one formula the economic whizzes surrounding Samaras haven’t used yet is collecting taxes that are due. Until that’s done, Greece will continue to rue what 19th Century American Supreme Court Chief Justice John Marshall wrote long before income taxes: “The power to tax is the power to destroy.”

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