Can Greece Get A Handle On Its Notorious Tax System?

Transcript

STEVE INSKEEP, HOST:

One big problem that Greece has to solve - as it digs itself out of its near financial collapse - is its tax system. The country's tax code is maddeningly complex, and tax evasion is widespread. Now, under the terms of a bailout from Greece's European creditors, the government has begun reforming that system, but as NPR's Jim Zarroli reports from Athens, it's an uphill battle.

JIM ZARROLI, BYLINE: In a dingy government building on a side street in Athens a steady stream of people come to pay their taxes - or at least try to. Javed Chaudry wanted to find out what he owes on the revenue from the store he owns, but he left unsatisfied.

JAVED CHAUDRY: (Through interpreter) It's difficult to pay your taxes because one clerk sends you to another clerk and no one knows anything so I can't find out what the exact amount is that I owe to the state.

ZARROLI: Chaudry at least wanted to pay his taxes. That's not always the case. Yannis Carabalis voiced a common complaint about Greece's tax system - it's too easy to cheat.

YANNIS CARABALIS: (Through interpreter) We need a regular process to prevent fraud. There are children receiving pensions in their father's names, even though they've been dead for 10 years. We have people getting handicap allowances who aren't handicapped.

ZARROLI: There are a number of reasons why Greece is in such poor fiscal shape, but tax evasion is almost certainly one of them. Costas Bakouris, who heads the local branch of Transparency International, says the number of Greeks who evade taxes is huge compared to the rest of Europe.

COSTAS BAKOURIS: Italy is probably not far behind us, but I would think we probably are the champions.

ZARROLI: Until recently, the Greek government has never made tax collection a top priority. Nick Malkoutzis, of the research firm MacroPolis, says one problem is that the tax office has long lacked independence.

NICK MALKOUTZIS: One of the problems that Greece's tax administration has had is that it's always been controlled by the government of the time. Effectively, politicians have gone after or not gone after people according to their political allegiances and connections.

ZARROLI: As governments rose and fell, they handed out exemptions to favored groups. Today, the Greek tax code is famously complex. There are special taxes on museums, hospitals and theaters. There's one tax for indoor swimming pools and one for outdoor swimming pools and a special tax on planes that sit on runways overnight. Orestis Seimenis, an accountant and writer, says these regulations have hurt Greece's economy.

ORESTIS SEIMENIS: (Through interpreter) If someone from abroad comes here and wants to invest and asks an accountant how much will I be taxed on my shares, the accountant will say one year it was 23 percent and the other year it was 40 and the other was 10, so the investor leaves and goes to Turkey.

ZARROLI: Tax evaders sometimes get caught, but the justice system is notoriously slow to prosecute them. Under the bailout terms from its European creditors, Greece pledged to modernize its tax system, but Nick Malkoutzis says that's tough to do under the best of circumstances.

MALKOUTZIS: To establish an efficient, transparent, accountable tax administration is a long-term project. It's not something you can do in a couple of years. And it's not - certainly not something you can do when you've had three, four changes of government in five years.

ZARROLI: He says it's even harder to do during a financial debacle. Not only does the government lack the resources to make reforms, but many Greeks are struggling to survive a crisis they blame at least in part on the government. And they don't have a lot of trust in the package of reforms they're being asked to support. Jim Zarroli, NPR News, Athens. Transcript provided by NPR, Copyright NPR.