May 24, 2017

Greece Wins Concession on Tax for Restaurant Meals

Starting on Aug. 1, the tax will drop to 13 percent from the current 23 percent, a move devised to aid small businesses and bolster the crucial tourism sector.

“For the first time, we are not just averting something unpleasant, but we are bringing positive change,” Mr. Samaras said in a televised address. He noted that government officials had also dissuaded Greece’s lenders from imposing new cuts to pensions and a tax on the self-employed.

Earlier this month, euro zone finance ministers approved 6.8 billion euros, or $8.9 billion, in rescue loans, to be disbursed in installments. But the payouts are subject to the Greek government’s honoring its commitments to the so-called troika of lenders, the International Monetary Fund, the European Commission and the European Central Bank.

The extent of the austerity measures, which Greek lawmakers are set to vote on early Thursday, has been a point of contention.

Mr. Samaras has long lobbied for the lowering of the value-added tax on restaurants and taverns. Government officials had insisted that a cut in the V.A.T. would increase revenue, not reduce it, as well as curb tax evasion.

“They don’t believe it yet,” Mr. Samaras said, referring to the troika. “But they agreed to try reducing taxes for the first time.”

A European Commission spokesman said the reduction would be made on a trial basis.

“A reduction in the V.A.T. rate for the restaurant sector would be possible without running any budgetary risks, so long as it was just a temporary measure,” the spokesman, Simon O’Connor, said in Brussels.

The initiative drew a caustic response from the main political opposition, the leftist party Syriza, which accused Mr. Samaras of “cynicism and hypocrisy” for announcing the tax cut a few hours before a parliamentary vote on new austerity measures that calls for thousands of layoffs and wage cuts in the Civil Service.

“The delayed and temporary reduction on V.A.T. in the food service sector is a drop in the ocean of the catastrophic policies of the memorandum,” the party said in a statement, referring to Greece’s bailout deal with the troika.

Despite the objections of Syriza and other opposition parties, as well as some lawmakers from the governing coalition, the legislation is expected to be approved by the 300-seat Parliament, where the government has a slim majority of 5. A vote was to begin at midnight on Wednesday after two days of debate.

With the volatile political climate, Mr. Samaras will have a tough time enforcing the new reforms, particularly layoffs of civil servants, who have remained relatively unscathed during four years of austerity that have crippled the Greek private sector, pushing unemployment above 27 percent. In a bid to appease the local authorities, the government late Tuesday withdrew an article in the bill that would have imposed disciplinary action on mayors found to exceed their budgets.

Article source: http://www.nytimes.com/2013/07/18/world/europe/greece-wins-concession-on-tax-for-restaurant-meals.html?partner=rss&emc=rss

UBS’s French Unit Fined €10 million in Tax-Evasion Inquiry

UBS France, based in Paris, and three current and former employees are already facing possible criminal charges on suspicion of having illegally sold banking services in the case, French prosecutors said on June 7. The authorities are trying to determine if UBS and its local unit sought to systematically identify wealthy clients to set up offshore accounts in violation of French law.

The fine announced Wednesday by the regulator, the Autorité de Contrôle Prudentiel, or A.C.P., is the largest possible under French law, and the largest ever handed down in such a case, said Geneviève Marc, a spokeswoman for the authority.

With a global crackdown on tax evasion under way, Swiss banks have been on the defensive for several years, most notably in the United States, where UBS in 2009 paid a $780 million fine and agreed to hand over the names of more than 4,450 American clients to the Internal Revenue Service to resolve accusations that it helped wealthy clients avoid taxes. That case continues to ripple through U.S.-Swiss relations, with Switzerland fumbling for a way to come clean with Washington about past practices without having to surrender its prized banking secrecy.

As was the case in the United States, French prosecutors suspect that UBS bankers sought to mix with affluent people at social and sporting events to drum up business for offshore accounts. Several hundred suspected French tax cheats linked to UBS have already been identified by the authorities.

The French regulator said Wednesday that UBS France had been warned by the autumn of 2007 of “grave concerns” that its commercial network might be facilitating illegal solicitation and tax evasion. Despite that, the regulator said, the bank “waited more than 18 months before putting in place the procedures and controles necessary to address the risk that its cross-border activities were not in compliance.”

The regulator also said the company had failed to control employees’ ability to share data with the Swiss parent institution to identify likely customers to set up offshore accounts to evade French taxes.

“We disagree with many of the disciplinary commission’s conclusions,” the parent company said in a statement from Zurich, where it is based. “UBS will further analyze the decision by the commission and will consider whether to appeal at the appropriate time.”

It also described the case as “an issue from the past,” and noted that the French regulator “acknowledges in its report that UBS France has taken appropriate steps to strengthen its compliance framework since 2009.”

The French banking regulator noted that the fine in no way prejudices the criminal investigation, to which it is providing its expertise. UBS has said that it is cooperating with the prosecutors.

The bank “does not tolerate any activities intended to help its clients circumvent their tax obligations,” it added.

Article source: http://www.nytimes.com/2013/06/27/business/global/ubs-french-unit-fined-in-tax-evasion-inquiry.html?partner=rss&emc=rss

E.U. Officials Quarrel Over the Pace of Bank Reform

Wolfgang Schäuble, the German finance minister, repeating a theme he has been stressing lately, said a change to the E.U. treaty — a politically hazardous process that can take years — would be needed to carry out those banking plans in full.

“I need a solid basis in the treaty,” Mr. Schäuble, referring to the creation of a single authority for shutting down banks, told the monthly meeting of finance ministers. “A two-step approach,” one that would start with a network of national authorities, was more feasible, he suggested.

But Jörg Asmussen, an influential member of the executive board of the European Central Bank, countered the Schäuble position by calling for a much faster march toward a uniform system of fixing bad banks.

“We want a single European resolution regime, together with a single resolution agency and a single resolution fund that is financed by a levy from the banking industry,” Mr. Asmussen told reporters outside the meeting.

“This should come into place in parallel with the single supervisory mechanism hopefully by the summer of next year,” said Mr. Asmussen. Although himself a German, Mr. Asmussen is not in league with Mr. Schäuble, a member of Chancellor Angela Merkel’s administration. And as a central banker, he is more focused on ensuring the smooth functioning of the euro zone’s major lenders.

Meanwhile, ramping up their fight against tax evasion, the finance ministers also gave a green-light for the European Commission to hold tax negotiations with Switzerland, Liechtenstein and three other tiny non-European Union states whose largely opaque financial sectors have been used by E.U. residents to hide undeclared assets.

But Austria and Luxembourg, both of which are renowned for their culture of banking secrecy, blocked efforts to expand the scope of information that banks in the European Union are obligated to share with tax authorities.

Luxembourg last month agreed to share data about interest income earned by E.U. citizens holding accounts in the country, something that Austria still refuses to do. But the two countries stood together Tuesday in rejecting proposals that would also make life insurance and other “savings-like” instruments subject to information exchange.

Luc Frieden, Luxembourg’s finance minister, told a news conference that his country “is not against the fight against tax fraud” but wants a “level playing field” that does not allow banking centers outside the Union like Switzerland to gain a competitive advantage.

Like Austria, Luxembourg is wary of money havens that have not signed up to the Union’s transparency rules.

Algirdas Semeta, the E.U. tax commissioner, expressed “great disappointment,” and said the issue will now be taken up by a summit of European leaders next week.

The commission has estimated that member states together lose about €1 trillion each year from illegal tax evasion, along with aggressive, but legal, tax avoidance. They are losses that Europeans governments are increasingly determined to recoup at a time when a deep economic slump has sharply reduced revenues.

The banking bailout issues remain thorny. As the crisis in Europe has unfolded, states and ultimately taxpayers from Britain to Spain have shouldered the cost of bailing out lenders hobbled in many cases by property and credit booms gone sour.

The meltdown helped to drive up the cost of sovereign borrowing, damaged investor confidence and inhibited the ability of many banks to restart lending. E.U. leaders have agreed on the need to break the so-called doom loop, where states go deeply into debt to support failing banks.

Late last year, only after an exhausting series of all-night meetings, the finance ministers agreed to put some of the biggest banks in the European Union under the authority of the E.C.B.

But analysts say a key next step in giving European authorities more sway over the Continent’s banking — agreeing to the system for restructuring and shutting banks — may be even harder to achieve.

Article source: http://www.nytimes.com/2013/05/15/business/global/eu-officials-quarrel-over-the-pace-of-bank-reform.html?partner=rss&emc=rss

Afghan Government Faces Cash Crunch, I.M.F. Says

A confidential assessment of Afghan finances by the International Monetary Fund said the potentially severe cash crunch was caused by widespread tax evasion abetted by government officials, the increasing theft of customs revenues by provincial governors and softening economic growth.

The I.M.F. assessment, which has not been publicly released but was described by American and European diplomats who were recently briefed on its findings, estimated that Afghan revenue in the first quarter of the year was roughly 20 percent to 30 percent short of an informal target the fund had set for the government.

After a decade of steadily growing tax and customs revenue, the budget shortfall has caught Afghanistan’s international backers by surprise. Diplomats portrayed it as an unwelcome reminder that the Afghan government remains weak and corrupt — and years away from being able to pay its own expenses.

If the trend is not reversed, diplomats said, the Afghan government will be unable to pay salaries by midsummer, though Finance Minister Omar Zakhilwal disputed that assessment. He put the shortfall at no more than 20 percent.

No one here expects the Afghan government to actually run out of money. It is supposed to cover about 40 percent of its nonsecurity spending this year, projected to total roughly $5 billion, and it could raise money by cracking down on tax evaders or imposing new fees for services.

As a last resort, international donors could always fill the gap. They already pay nearly the entire cost of Afghanistan’s police force and army, and have agreed to cover roughly 60 percent of the government’s other spending this year.

For now, fear of instability still trumps the desire for good governance among Western donors, and aid commitments are likely to hold through the end of the NATO combat mission in 2014, diplomats said.

But the looming cash crunch comes at a delicate time. Kabul is negotiating a long-term security deal with the United States and is looking for other Western countries to make good on aid pledges that amount to tens of billions of dollars after 2014.

Smaller countries with little or no military commitment here are especially likely to reassess their aid spending at that point, diplomats said.

If Afghan officials “don’t have the confidence in their own country to find a way to pay for it themselves, than why should we?” said a European diplomat from one of those smaller countries. The diplomat and others spoke on the condition of anonymity to avoid angering Afghan officials.

For President Hamid Karzai, who has been pushing for greater control of Afghanistan’s affairs, the revenue problems strikes at a more fundamental issue: a country that cannot pay for itself is not its own master.

“Let us be honest,” Bernard Bajolet, the recently departed French ambassador, said at a farewell cocktail party. “Sovereignty won’t be effective as long as Afghanistan won’t be fully self-reliant financially.”

Afghanistan, to be sure, has made huge economic strides since 2001, and the signs of growing prosperity abound. Dozens of international flights a week arrive in Kabul, late-model cars crowd the congested streets of the capital, and cellphones have largely replaced the hand-held satellite phones that just over a decade ago were the sole way to make a call.

But the country will nonetheless need billions in financial aid through 2032 to cover its nonsecurity spending, never mind to pay for its army and police force, according to another I.M.F. review that was quietly released in February.

American and European officials rarely speak of horizons that long. The current aid pledges for nonsecurity spending, which are contingent on the Afghan government combating corruption, run only through 2016

— it is 2018 for security spending — with only vague assurances of what will come afterward.

   Alissa J. Rubin contributed reporting. 

Article source: http://www.nytimes.com/2013/05/03/world/asia/afghan-government-faces-cash-crunch-imf-says.html?partner=rss&emc=rss

Support Grows for European Effort to Fight Tax Havens

Miroslav Kalousek, the Czech finance minister, pledged to join the push for more automatic exchanges of bank records that already had the backing of Britain, France, Germany, Italy and Spain, a spokesman for the Czech representation to the European Union said Sunday.

The spokesman said the Czech minister made his overture on Saturday during a two-day meeting of European finance ministers where Poland, followed by Belgium, the Netherlands and Romania, also signed up, bringing the number of countries supporting the initiative to 10. The campaign is being strongly backed by the French finance minister, Pierre Moscovici.

For France, the issue has taken on greater urgency since Jérôme Cahuzac resigned as budget minister after acknowledging he had foreign holdings in Switzerland that he had previously denied.

“The surge in member states’ appetite for progress and action in the fight against evasion is extremely welcome,” Algirdas Semeta, the Union’s commissioner for taxation, said Saturday after two days of meetings in which ministers discussed adoption of Europe-wide laws modeled on the Foreign Account Tax Compliance Act, a U.S. initiative to find hidden accounts overseas.

“The tools are already on the table, waiting to be seized,” Mr. Semeta said, referring to plans in Europe to provide greater exchanges of information on interest earned on savings, including from trusts and foundations.

Mr. Semeta said that the European crackdown against tax evasion could eventually extend to dividends, capital gains and royalties, significantly expanding the revenue earned by national treasuries. He also encouraged countries to set an earlier date — it is currently foreseen as 2017 — for when those revenues are meant to fall under the microscope.

Europe is also being pushed toward greater transparency by the recent release of an investigative report on thousands of offshore bank accounts and shell companies, and by the prospect of a meeting of finance ministers from the Group of 20 leading economies on Thursday in Washington, where tax transparency is expected to be discussed.

In the French case, the Socialist government of François Hollande was deeply embarrassed by the revelations that Mr. Cahuzac had foreign holdings at a time of economic hardship for many citizens, and Mr. Moscovici led the calls for reforms at a hastily assembled news conference on Friday evening.

Taking leadership on the issue of tax havens “is very important for ensuring that citizens can trust the efficiency and fairness of our tax systems,” Mr. Moscovici said, flanked by Wolfgang Schäuble, the German finance minister, and George Osborne, Britain’s chancellor of the Exchequer, and by ministers from Poland, Spain and Italy.

The initiative should eventually cover “all kinds of revenues” and would be similar to the American tax compliance act, Mr. Moscovici said.

One European tax haven, Luxembourg, bowed to such pressure on Wednesday and said it would begin forwarding the details of its foreign clients to their home governments.

Standing in the way is Austria, which has resisted agreeing to an automatic exchange of banking information between E.U. countries.

Chancellor Werner Faymann of Austria recently suggested that talks were possible, and European officials said they thought that Austria eventually would offer concessions. But the country’s finance minister, Maria Fekter, has showed no signs of backing down.

“We will fight for bank secrecy,” Ms. Fekter said on Saturday. “We are no tax haven,” she said. A day earlier she sought to portray Britain as one of the Union’s biggest tax havens.

Mr. Osborne said on Friday that he was pushing for more transparency from the Cayman Islands and British Virgin Islands.

More European countries are expected to join the campaign in coming weeks after Herman Van Rompuy, the president of the European Council, said on Friday that the bloc’s 27 leaders would discuss the issue at a summit meeting of leaders next month in Brussels.

Article source: http://www.nytimes.com/2013/04/15/business/global/support-grows-for-european-effort-to-fight-tax-havens.html?partner=rss&emc=rss

Austria Defends Banking Secrecy Rules

DUBLIN — Austria will not knuckle under to pressure to follow Luxembourg in dropping its banking secrecy rules, Finance Minister Maria Fekter said Friday, as she sought to portray Britain as one of the European Union’s biggest tax havens.

“Great Britain has many money laundering centers and tax havens in its immediate legal remit,” Ms. Fekter said, pointing to the Channel Islands, Gibraltar, the Cayman Islands and the British Virgin Islands. Those offshore financial centers are under effective British control, though all but Gibraltar remain technically outside of the European Union.

In a move that could raise pressure on Austria, Herman Van Rompuy, the president of the European Council, said Friday that the Union’s 27 leaders would discuss the issue at a summit meeting next month.

“The current economic crisis only helps to stress the urgent need for fair and effective tax systems,” Mr. Van Rompuy said in a statement broadcast over the Internet.

In an opinion piece Thursday in Kurier, an Austrian newspaper, Ms. Fekter called on the European Union to demand the same openness in financial matters of Britain as it had of Cyprus as a condition for the latter’s bailout.

Ms. Fekter spoke in Dublin on Friday as euro zone finance ministers were beginning two days of meetings in which the subject of combating tax evasion was to be on the agenda. The European tax commissioner, Algirdas Semeta, has said that tax evasion costs European nations about €1 trillion, or $1.3 trillion, in lost revenue each year, and cash-strapped governments are eager to track down their citizens’ hidden assets.

Austria had been sending mixed messages on the topic, with Chancellor Werner Faymann suggesting recently that talks were possible. But Ms. Fekter was adamant on Friday, saying: “Austria is sticking to bank secrecy.”

On Wednesday, Luxembourg bowed to pressure from its European partners in the wake of the collapse of Cyprus’s financial sector and from the United States, which is demanding client data under the Foreign Account Tax Compliance Act, and said it would start sharing banking information with other nations in 2015.

Luxembourg’s change of heart left Austria as the only E.U. member state to not share foreign clients’ data with their home governments. Austria transfers to foreign account holders’ home governments the proceeds of a 35 percent withholding tax on interest income earned in Austrian banks, but it does not disclose the clients’ identities.

“We fight tax evasion and money laundering,” Ms. Fekter said, but added, the “automatic exchange of information involves a massive interference in people’s privacy rights.”

The issue of tax havens has come to the fore in Europe since the release this month by the Washington-based International Consortium of Investigative Journalists of data on thousands of offshore bank accounts and shell companies, and a scandal in France over Jérôme Cahuzac, the former budget minister, who quit after admitting to having foreign holdings that he had previously denied.

Article source: http://www.nytimes.com/2013/04/13/business/global/austria-defends-banking-secrecy-rules.html?partner=rss&emc=rss

Today’s Economist: Bruce Bartlett: America’s Most Profitable Export Is Cash

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Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul. He is the author of “The Benefit and the Burden: Tax Reform – Why We Need It and What It Will Take.”

Two things I’ve heard my whole life that always seem within reach but have never occurred are that we will move to paperless offices and a cashless society. In theory, it seems simple enough; computers and the Internet should obviate the need for paper, and credit and debit cards and electronic bill pay should make cash superfluous.

Today’s Economist

Perspectives from expert contributors.

However, as we all know, we are no closer to a paperless office than we were at the dawn of the computer era. Same goes for the cashless society. As a new report from the Federal Reserve Bank of San Francisco explains, cash has not only held its own against competitors but continues to grow in popularity. Measured in dollar terms, there is 42 percent more cash in circulation today than five years ago.

Among the reasons for the rise in cash holdings are convenience, dependability and anonymity. Another key factor is the decline in interest rates, which has reduced the opportunity cost of holding cash relative to such interest-earning assets as bank deposits, money market funds and Treasury bills.

Many economists believe that the rise in cash is strongly related to growth in the so-called underground economy – criminal activity such as drug dealing, as well as tax evasion by people working off the books for cash. Strong evidence for this proposition comes from examining the distribution of cash holdings by denomination.

Federal Reserve Board

As one can see, 84 percent of the increase in cash since 1990 has been in the form of $100 bills, which have risen to 77 percent of the value of cash outstanding in 2012 from 52 percent in 1990.

I seldom use $100 bills for anything except Christmas gifts to nieces and nephews, nor do I ever see people use them in stores. I suspect that most people have the same experience. For large purchases, most law-abiding people use checks or credit cards.

Studies and common sense suggest that those people most likely to use large bills are doing so for nefarious purposes, especially drug dealing. One can easily fit $1 million in $100 bills into a briefcase.

Another key factor has been the rising amount of United States currency being exported. The Federal Reserve estimates the annual flow of United States currency abroad as well as the total level of such currency, which is counted in the aggregate currency figures in the table above. (These data appear on Line 25 in Tables F.204 and L.204 in the Fed’s Z.1 flow of funds release.)

Federal Reserve

One consequence of the rising share of United States currency held abroad is that it may distort analyses of the relationship between the money supply and economic activity. Many economists believe that inflation results largely, if not exclusively, from an increase in the money supply, much of which consists of currency, the rest being bank deposits, travelers checks and other forms of money.

But if much of the money supply circulates abroad, then any analysis correlating the money supply to domestic economic activity may be distorted and provide false conclusions.

Incidentally, exports of cash appear in the Commerce Department’s data on international transactions (Line 67). It is recorded as an increase in foreign-owned assets in the United States, but is better thought of as an almost costless way of financing a good chunk of our current account deficit. It’s like borrowing money from foreigners that most likely will never have to be paid back, at zero interest.

Foreigners hold United States currency for the same reasons Americans do and may have better motives for doing so, especially in countries suffering severe financial problems such as Cyprus and Greece. Moreover, the continuing economic crisis in Europe has diminished the popularity of the euro even though it has the advantage of coming in 500-euro denominations, about $645 at current exchange rates, making it more compact and convenient for large cash transactions.

However, some countries have withdrawn those notes as a crime-fighting measure, which has probably raised the popularity of the good old $100 bill. (United States $500 and larger bills are no longer produced and are withdrawn when found.)

According to a Federal Reserve study, the vast bulk of United States currency held abroad is $100 bills. Indeed, 65 percent of all $100 bills in existence circulate outside the United States.

Article source: http://economix.blogs.nytimes.com/2013/04/09/americas-most-profitable-export-is-cash/?partner=rss&emc=rss

Group of 20 Pledges to Let Markets Set Currency Values

MOSCOW — In a concerted move to quiet fears of a so-called currency war, finance officials from the world’s largest industrial and emerging economies expressed their commitment on Saturday to “market-determined exchange rate systems and exchange rate flexibility.”

In a statement issued at the conclusion of a conference here of the Group of 20, the finance ministers from the Group of 20 promised: “We will refrain from competitive devaluation. We will not target our exchange rates for competitive purposes.”

In its statement, the group also vowed to “take necessary collective actions” to discourage corporate tax evasion, particularly by preventing companies from shifting profits to avoid tax obligations. For instance, a number of big American companies, including Apple and Starbucks, have come under scrutiny recently for seeking out the friendliest tax jurisdictions.

Over all, the statement largely echoed one last week by seven top industrial nations pledging to let market exchange rates determine the value of their currencies. Currency devaluation can be used to gain competitive advantage because it makes a country’s exports cheaper.

“We all agreed on the fact that we refuse to enter any currency war,” the French finance minister, Pierre Moscovici, told reporters at the conference, which was held in a meeting center just a short walk from the Kremlin and Red Square.

In the statement on Saturday, the Group of 20 pointedly avoided any criticism of Japan, where stimulus programs backed by Prime Minister Shinzo Abe have kept interest rates near zero and flooded the economy with money — leading to a roughly 15 percent drop in the value of the yen against the dollar over the last three months.

The Japanese policies, which have reduced the cost of Japanese products around the world, were the primary cause of fears of a currency war.

In essence, the Group of 20 expressed a view that loose monetary policy, including steps that weaken currency values, are acceptable when used to stimulate domestic growth but should not be used to benefit in global trade.

Critics of that view say that it amounts to a distinction without a difference because loose monetary policies stimulate growth and bolster exports at the same time.

The United States has also used a loose monetary approach to aid in the economic recovery, in the form of “quantitative easing” by which the Federal Reserve buys tens of billions of dollars in bonds each month.

The chairman of the Federal Reserve, Ben S. Bernanke, who attended the conference in Moscow, gave brief remarks on Friday indicating support for Japan’s efforts.

Faster-growing, developing countries like Brazil and China have expressed concerns about the loose monetary policies of more established economies like Japan and the United States. The money created by policies like the Fed’s quantitative easing can prove destabilizing as it enters faster-growing economies.

The Group of 20 acknowledged this concern in its statement, saying: “Monetary policy should be directed toward domestic price stability and continuing to support economic recovery according to the respective mandates. We commit to monitor and minimize the negative spillovers on other countries of policies implemented for domestic purposes.”

As the three-day conference drew to a close, participants did not reach any new agreement on debt-cutting targets. Efforts to reach such a pact will continue at the annual Group of 20 summit meeting to be attended by President Obama and other world leaders in St. Petersburg in September.

But while the debt agreement was elusive, the Group of 20 leaders reiterated efforts to work together, promising to “resist all forms of protections and keep our markets open.”

Article source: http://www.nytimes.com/2013/02/17/business/global/group-of-20-pledges-to-let-markets-set-currency-values.html?partner=rss&emc=rss

Greece Tax Scandal Shifts Focus From Collection Problem

Mr. Papaconstantinou, in turn, hinted darkly that he was the victim of a plot masking malfeasance at higher levels.

While the firestorm may have made for political theater of a sort, it has diverted attention from a much bigger problem: Greece, its foreign lenders say, has fallen woefully short of its tax collection targets and is still not moving hard enough to tackle widespread tax evasion — long tolerated, particularly among the country’s richest citizens.

Greek officials agreed to the targets as part of an international lending pact last year, but there is no penalty for missing them. In recent weeks, however, two reports by Greece’s foreign lenders have found that Athens pulled in less than half of the additional tax income that it expected last year and performed fewer than half of the expected audits.

One report said that Athens had brought in a little less than $1.3 billion in additional taxes of the $2.6 billion it had hoped to collect in 2012. Only 88 major taxpayers, including corporations, were the subject of full-scope audits, well below a target of 300, the report said, while just 467 audits of high-wealth individuals were completed, compared with a goal of 1,300.

The fragile, three-party coalition government of Prime Minister Antonis Samaras continues to vow it will crack down on corruption and tax evasion, but a blunt assessment last month by a task force of Greece’s foreign lenders said, “These changes have not yet been reflected in results in terms of improved tax inspection and collection.” Analysts say the failure to pursue tax evaders aggressively is deepening social tensions. “It’s a weak government with very difficult work to do, and this is very, very bad for the morale of the people,” said Nikos Xydakis, a political columnist for Kathimerini, a daily newspaper. “This year will be hell for the middle-class people. And the rich people are untouchable. This is very bad.”

In a separate report, the European Union and the International Monetary Fund said they were concerned that the “authorities are falling idle and that the drive to fight tax evasion by the very wealthy and the free professions is at risk of weakening.”

The report added that total unpaid taxes amounted to nearly $70 billion, about 25 percent of Greece’s gross domestic product. But only about 15 percent to 20 percent of the amount is actually collectible, either because the statute of limitations has run out or the scofflaws do not have the money.

It pressed Greece to focus on the cases most likely to produce real revenues, especially in vocations where tax evasion has become pernicious. “Doctors and lawyers are a good place to start,” it said.

Critics, especially the leftist party Syriza, which leads in opinion polls, say the government has not done enough to stop corruption because its members are tied to the country’s business elite and do not want to jeopardize their political careers.

“The problem is not simply tax evasion among the rich,” said Zoe Konstantopoulou, a member of Parliament from Syriza who serves on a panel investigating the so-called Lagarde list, a compilation of more than 2,000 Greeks with accounts in a Swiss branch of HSBC that had been sent to Mr. Papaconstantinou in 2010 by Christine Lagarde, then the finance minister of France. “The problem is tax evasion among the rich with the complicity and the aiding and abetting of those who govern.”

While Greece received a badly needed $45 billion in aid last month to help it avoid defaulting on its debts, critics say that unless Athens can more forcefully tap the billions it is owed in taxes, it will never pay off its debts, even if its moribund economy eventually starts to recover.

A dysfunctional bureaucracy weakened by budget cuts, two destabilizing rounds of elections last spring and an economy decimated by austerity have hampered tax collections further. But a thicket of regulations and a culture of resistance also fuel a shadow economy that includes an estimated 25 percent of economic activity.

Liz Alderman reported from Paris, and Rachel Donadio from Rome. Niki Kitsantonis contributed reporting from Athens.

Article source: http://www.nytimes.com/2013/01/06/world/europe/greece-tax-scandal-shifts-focus-from-collection-problem.html?partner=rss&emc=rss

Senators in Italy Pass Plan for Budget

Although it has a parliamentary majority, the month-old technocratic government of Prime Minister Mario Monti called a confidence vote on the measures to avoid having to address modifications proposed by the Northern League, once a pillar of former Prime Minister Silvio Berlusconi’s center-right coalition and now the loudest opposition party.

The measures — which have grown increasingly unpopular as the reality sets in for Italians — reinstate a property tax on first homes, among other tax increases; raise the retirement age to 66 for men and 62 for women by 2012; and raise the ceiling for cash transactions to $1,300, among other measures to crack down on tax evasion.

The government has said that it tried to spread the pain among all segments of society and not just hit what many call “the usual suspects” — taxpaying salaried employees who often take the brunt of tax increases because tax evasion among nonsalaried workers is so high.

Mr. Monti — a former European commissioner and university president who must work with a Parliament whose largest bloc, the center-right, is eager for early elections to solidify its political standing — has said that the bywords of his government are “equity,” “rigor” and “growth.”

To stimulate growth — which remained flat at 0.3 percent in Italy over the past decade — the measures also provide tax incentives for businesses that hire women and people under 35 on permanent contracts. Business groups have called for even more sweeteners to prevent the economy from contracting further.

In a speech just before the vote, Mr. Monti underlined the need to orient European economic policies more toward growth, rather than just concentrating on fiscal discipline. Calling the measures a “proof of collective discipline,” Mr. Monti said that the package enabled Italy to hold its head high as it faces the undeniably serious European crisis.

Although Mr. Monti still enjoys broad political and popular support, the measures have become increasingly unpopular in a growing climate of economic uncertainty, in a country that is already in recession, and where salaries have remained flat in recent years.

“I know that we all have to cooperate and that the measures were needed, but my feeling is that they always turn to the same people, like pensioners or those with low salaries,” said Maurizio Capecci, an unemployed 57-year-old who sells lottery tickets during the Christmas season in downtown Rome. “I think the government should have introduced a wealth tax. Why can’t those who have more give more, but for real?”

A strike called by labor unions shut down national transportation last week, and more strikes are anticipated in the coming months to protest changes in pension rules and labor contracts. Mr. Monti’s government has said that it is planning to tackle labor reform — long a third rail in Italian politics — in the new year.

Gaia Pianigiani contributed reporting.

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