ATHENS—Of all the challenges Greece has faced in recent years, prodding its citizens to pay their taxes has been one of the most difficult.
At the end of 2014, Greeks owed their government about €76 billion ($86 billion) in unpaid taxes accrued over decades, though mostly since 2009. The government says most of that has been lost to insolvency and only €9 billion can be recovered.
Billions more in taxes are owed on never-reported revenue from Greece’s vast underground economy, which was estimated before the crisis to equal more than a quarter of the country’s gross domestic product.
The International Monetary Fund and Greece’s other creditors have argued for years that the country’s debt crisis could be largely resolved if the government just cracked down on tax evasion. Tax debts in Greece equal about 90% of annual tax revenue, the highest shortfall among industrialized nations, according to the Organization for Economic Cooperation and Development.
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Greece’s new government,
scrambling to secure more short-term funding, agreed on Tuesday to make tax collection a top priority on a long list of measures. Yet previous governments have made similar promises, only to fall short.
Tax rates in Greece are broadly in line with those elsewhere in Europe. But Greeks have a widespread aversion to paying what they owe the state, an attitude often blamed on cultural and historical forces.
During the country’s centurieslong occupation by the Ottomans, avoiding taxes was a sign of patriotism. Today, that distrust is focused on the government, which many Greeks see as corrupt, inefficient and unreliable.
“Greeks consider taxes as theft,” said Aristides Hatzis, an associate professor of law and economics at the University of Athens. “Normally taxes are considered the price you have to pay for a just state, but this is not accepted by the Greek mentality.”
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Some also see grounds for cynicism in the case that opened Wednesday in Athens against former Finance Minister George Papaconstantinou. The 53-year-old faces charges that during his 2009-11 tenure, he illegally removed the names of three relatives from a list of suspected tax evaders. At the hearing Mr. Papaconstantinou denied the charges, for which he faces a life sentence if convicted.
Alleged corruption among politicians only strengthens Greeks’ conviction that evading taxes in their own everyday lives isn’t a serious crime, and little stigma is attached to getting caught, unlike in other European countries or even the U.S.
Much of Greece’s tax evasion occurs in the small transactions of daily life.
A 32-year-old chef in Athens says his income taxes are automatically deducted from his monthly paychecks. But every time he buys something and is given an option to pay less if he doesn’t ask for a receipt, he says yes.
“It is a win-win situation,” he said. “I pay less for the products and the store pays less in taxes.”
Greeks’ innate resistance to taxation is one reason Syriza,
the leftist party now in power, campaigned against the tax increases championed by the previous government in the run-up to elections. The party went so far as to embrace a grass-roots antitax movement called “I won’t pay.”
The country’s previous government introduced a controversial new property tax, for example, that led to a sevenfold increase from 2009 levels in collection last year, to €3.5 billion. But Syriza and other critics assailed the tax as unfair and many Greeks stopped paying it late last year, partly in anticipation that the new government would change it.
The government’s tax-revenue shortfall in January alone was 23% below its €4.5 billion target for the month.
Last week, the government outlined plans to forgive up to 50% of individuals’ tax arrears, a sign it would make good on its campaign rhetoric.
Syriza would risk a popular uprising by the very people who put it into power if it were to back away from those policies and get tough on taxes, political analysts warn. Even within the government’s own ranks, officials say Syriza can’t risk tougher enforcement.
The reason isn’t just political, but economic. The country’s depression has already pushed many small businesses to the brink of collapse. Forcing them to pay more in taxes would put even more out of business—and more Greeks out of work.
“The Greek economy would collapse if the government were to force these people to pay taxes,” one senior government official said.
Though Greece’s rich have often been singled out for not paying their due, the vast majority of tax evasion occurs at the lower end of the income scale, among small and medium-size enterprises, government officials say.
“Most small companies know they will never be audited so they don’t bother to pay taxes,” said a European official sent to help Athens overhaul its tax system. Many companies report they pay their workers the minimum wage, then supplement it under the table to avoid having to pay higher payroll taxes.
The owner of a small hotel outside Athens, says she as much as doubles her three employees’ pay during the busy summer months. The arrangement benefits everyone, she says, because her employees get more money and neither side has to pay more in taxes.
“If I had to pay them even more the whole year, I would have to fire one of them,” she said.
Other companies give workers store or restaurant credits in lieu of cash.
A 28-year-old saleswoman says her company gives employees special coupons they can cash in supermarkets, restaurants and for other services.
“It works much better for us because the money isn’t taxed,” she said.
