LONDON — As controversy swirls around the failure of former Greek finance ministers to investigate a list of 2,000 suspected tax dodgers, the current government in Athens is taking a hard look at the foreign assets of those people and thousands of others.
In recent weeks, tax experts at Greece’s finance ministry have been scrutinizing the finances of about 15,000 Greeks to see if money they have sent abroad in the past three years — about $5 billion in all — exceeds the declared wealth on their tax returns, government officials say.
The government of Prime Minister Antonis Samaras is intent on cracking down on wealthy tax evaders as it tries to quell mounting public anger over a slate of austerity measures that the Greek Parliament last week passed by a thin margin. Early Monday, the government won approval for its 2013 budget, which, due in part to persistent tax evasion, must rely on a punishing mix of spending cuts and indirect tax increases to meet targets set by the country’s creditors.
The emergence of the “Lagarde list” of 2,000 individuals with overseas bank accounts — named after a list given to the Greek government in 2010 by Christine Lagarde, then the French finance minister and now head of the International Monetary Fund — and the failure of previous governments to act on it has outraged a generation of austerity-weary Greeks. It highlights as well a longstanding societal fissure between those forced to absorb an ever-increasing tax burden and those who escape the duty by sending money overseas.
The 15,000 names under investigation have been narrowed down from a master list of about 54,000 individuals. One might call it a Lagarde list on steroids — an up-to-date roster of lawyers, bankers, doctors, merchants and even farmers who for decades now have made up the cream of Greece’s tax-avoiding crop.
In the 2013 budget, the government forecasts 44 billion euros in tax revenues, the lowest figure since pulling in 42.3 billion euros in 2006.
While much of the blame for the lower intake can be directed at the economic collapse, the fact that revenues continue to decline three years into an austerity program in which improved tax collection has topped the reform agenda underscores the depth of the problem.
The government isn’t projecting how much the tax push might raise, and many citizens are skeptical that Greek officials will suddenly wrest billions from wealthy scofflaws.
But the initiative could not come at a more crucial moment. Having just barely secured parliamentary support for new austerity measures, in the coming weeks Greece must persuade its creditors to release 31 billion euros in fresh bailout loans or face bankruptcy.
At the root of the decline in tax collection has been the capital flight of Greece’s tax base.
Friedrich Schneider, an economics professor at Johannes Kepler University in Linz, Austria, estimates that about 120 billion euros in Greek assets lie outside the country, representing an extraordinary 65 percent of the country’s overall economic output. The assets abroad include bank deposits, real estate holdings and untaxed business income.
A frequent adviser to European governments and international financial institutions, Mr. Schneider says that 70 billion euros is in Switzerland, about 20 billion euros is in Britain, with the rest spread out in other places like the United States, Singapore and offshore tax havens like the Cayman Islands.
“All the rich people have sent their money out of the country,” said Mr. Schneider, who is perhaps the foremost expert on tax evasion and shadow economies in Europe. “That is why we have such unequal burden-sharing, with the average Greek having lost 40 percent of their income after taxes, while the wealthy have their money outside of Greece.”
The solution, as Mr. Schneider sees it, is not to heap more taxes on the country’s evaporating tax base or to use legal threats to pursue the offshore cash. Instead, he suggests a tax amnesty in which all outside money would be invited back — with no questions asked — and be subject to a flat tax of 15 to 20 percent.
Article source: http://www.nytimes.com/2012/11/12/business/global/greece-renews-struggle-against-tax-evasion.html?partner=rss&emc=rss