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February 21, 2011 11:10 pm
Greece has unveiled tough legislation to reduce tax evasion as part of reforms agreed in return for a €110bn bail-out by the European Union and the International Monetary Fund.
A draft bill presented to parliament on Monday proposes jail sentences for people convicted of non-payment of income tax obligations above €75,000 and value added tax above €150,000.
The finance ministry will launch a three-year action programme next month aimed at combating pervasive tax evasion, including measures to curb corruption among tax officials.
More than 30 per cent of due revenues go uncollected, according to official estimates.
Following criticism by the EU and the IMF that Greece was failing to “name and shame” prominent offenders, the new legislation provides for publishing lists of large-scale tax evaders.
Overall revenues rose only 5.5 per cent last year against an initial target of 13.8 per cent, in spite of two increases in value added tax and excise taxes on fuel and cigarettes.
Greece’s prolonged recession has added to the problem of evasion, with a sharp rise in fuel smuggling and fraudulent accounting by companies that under-report exports and fake transfers of funds to subsidiaries abroad, officials said.
Yet the government still lacks broad-based political support for modernising the tax system.
George Papaconstantinou, finance minister, had to withdraw a measure backed by EU and IMF experts, setting up special courts to handle tax disputes, because of fierce opposition from members of the governing socialist party.
The bill provides instead for appointing an independent body of tax arbitrators to accelerate settlement of disputes over claims above €150,000.
ESEE, a Greek business organisation, said on Monday that lost tax revenues due to companies shutting down last year amounted to €3bn.
It said lost tax revenues would exceed €6.5bn this year, with more than 120,000 small and medium-sized enterprises forecast to close because of the deepening crisis.
The conservative opposition party New Democracy said the new legislation was aimed at “making penalties stricter while overlooking the fact that the tax-paying capacity of businesses and individuals is becoming exhausted”.
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