Plaskovitis looks to have his work cut out for him, hard pressed as he appears to be between the sluggish performance of his subordinates and the ambitious demands of his political superiors, Finance Minister Yiorgos Papakonstantinou and his deputy, Filippos Sachinidis.
As the highest administrative post in the state bureaucracy, one filled by government appointees, a secretary-general’s executive responsibilities include the day-to-day running of a Greek ministry, as well as oversight of implementing government policy at the departmental level.
Together, Plaskovitis and the Pasok government face the unprecedented task of plugging a fiscal hole that amounts to 12.7 percent of gross domestic product. At four times the EU limit of 3 percent of GDP, the annual budget deficit is the biggest 2009 fiscal shortfall in the EU.
The poor financial showing is being blamed on the collapse of Greece’s taxation system under the previous conservative administration. In a one-on-one interview with the Athens News, Plaskovitis explained why getting the country’s public finances back on track should not be seen as unattainable.
Diagnosis
Athens News: They say you’re taking over an administrative mess as far as tax collection is concerned. What’s your view about its causes? Was it by design, ineptitude or neglect that your predecessors failed so badly in meeting their own targets?
Elias Plaskovitis: It was probably all these things simultaneously, plus a few other faults which we must try to avoid. When you have a system of government which constantly offers generous tax breaks, tax-debt settlements or tax-debt rescheduling, and all sorts of tax-payment delays - to avoid slapping punitive fines on those who fail to meet their obligations - I would daresay that this was partly a failure by design.
And if - as a consequence of that - the same system fails to take elementary organisational measures, including the application of technological infrastructure to help tax inspectors fulfil their mission fairly and effectively, what we have is a sort of systematic negligence.
This is not because the previous government didn’t want to collect the taxes it needed to meet its targets, but because the necessary consequence of politically prejudiced stance on taxation is the failure to collect enough taxes.
Ingrained?
The question is: Can your administration do something about it, or is it a hereditary shortcoming in Greek public finance?
I honestly believe that there’s a lot we can still do in the present setup and with the available staff of our taxation system. We also possess the computerised information systems which previous governments have failed to activate and utilise on time for the capture of wider categories of taxable income than they have so far.
Some of these IT systems are tried and tested, while others, like the Elenksys software, are relatively recent acquisitions that haven’t yet been applied for the more detailed correlation of fiscal data to pinpoint the pockets of tax evasion. But once our tax-collection infrastructure, technical expertise and inspection methods are mobilised to their fullest potential, they can bear the results which we hope for, in the next two-to-three years.
Let’s be more specific. There are the famous 31 billion euros of ‘verified debts to the state’ which Prime Minister George Papandreou mentioned during the election campaign. How much of that is collectible?
In the few days that I have been here, it is impossible to give a numerical value to sums that need to be double-checked in order to ascertain whether they are collectible and to what extent their collection is practically feasible, since most of these funds concern liabilities of different state entities to one another.
Some are not collectible at all because the indebted agency has gone bankrupt or has been liquidated. Others are still enmeshed in civil court disputes that haven’t reached a final settlement.
Cut to the chase
What I wish to stress is that one of our tax system’s most salient shortcomings is in our collection of verified tax liabilities. The problem is further compounded by the enormous amount of time taken to pursue a tax-debt case through the Greek courts.
Related to that are the extremely high fines levied on indebted taxpayers, which is supposed to be a disincentive for running into tax debt in the first place. But in practice it ends up discouraging the swift collection of relatively small initial tax liabilities at the moment they arise.
The lack of transparency in the ensuing procedure of debt verification fosters extreme court delays, as well as widespread corruption and, ultimately, low net revenue collection. We are therefore considering the need to find a new balance between the incentives to pay taxes and the disincentives to avoid paying taxes.
However, people are more concerned about the objective criteria of income determination which the government is planning to enforce in 2010, including bank deposits, stocks or offshore accounts. But does it have the political willpower to penetrate the web of such tax-evasion instruments?
We certainly have the political will and the technical means to throw the tax-net on a wider target group. But it would be literally criminal, at this critical juncture, for all those who can afford to contribute to economic recovery or have illegally dodged their obligations in the past, to keep shifting the burden of taxation on their less wealthy fellow citizens and on the future generations of Greeks.
It would also be a terrible failure of our administration if the social base of tax revenue remains confined to its present sources. Our tax inspection procedures, especially in the field of income data correlations, must therefore become targeted on groups where tax evasion is obviously rampant.
We must set specific priorities for inspection based on solid evidence of hidden incomes or likelihood of tax fraud, rather than the customary random-sample checks. Our first instructions conveyed to the tax authorities put special emphasis on this qualitative shift of inspection priorities.
54,4%
of individual households declare annual incomes below the tax-exempt minimum of 12,000 euros, the annual average being 6,000 euros, or 500 euros per month
33%
of individual households declare annual incomes of between 12,000 and 30,000 euros - with an annual average of 19,000 euros, or less than 1,600 euros per month
74%
of the total annual tax revenue from individuals is paid by wage earners and pensioners, while independent professionals only pay 4% of the total
99%
of all enterprises (ie 202,418 small firms with one to five employees) pay an average annual tax of 6,100 euros, equivalent to the tax payable by a salaried em ployee earning 2,000 euros per month
90%
of all income tax returns declare incomes of less than 30,000 per year, which pay only 25% of the total tax revenue from individuals. The remaining 75% of tax receipts is paid by the wealthier 10% of taxpayers
Case study
Of the 150 doctors who have their private practice in Kolonaki, the most expensive district in Athens, 30 declare annual incomes below 10,000 euros, another 30 declare between 10,000 and 20,000 euros, and another 30 declare between 20,000 and 30,000 euros per annum.
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