Beware of Greeks bearing bonds

Scofflaw

This could have gone in the "Burn Greece" thread, but it really is worth a look on its own merits - an article by Vanity Fair highlighting the extent (admittedly anecdotally) of tax evasion and book-cookery in Greece: http://www.vanityfair.com/business/features/2010/10/greeks-bearing-bonds-201010

First page highlights:

“Our people went in and couldn’t believe what they found,” a senior I.M.F. official told me, not long after he’d returned from the I.M.F.’s first Greek mission. “The way they were keeping track of their finances—they knew how much they had agreed to spend, but no one was keeping track of what he had actually spent. It wasn’t even what you would call an emerging economy. It was a Third World country.”

As it turned out, what the Greeks wanted to do, once the lights went out and they were alone in the dark with a pile of borrowed money, was turn their government into a piñata stuffed with fantastic sums and give as many citizens as possible a whack at it. In just the past decade the wage bill of the Greek public sector has doubled, in real terms—and that number doesn’t take into account the bribes collected by public officials. The average government job pays almost three times the average private-sector job. The national railroad has annual revenues of 100 million euros against an annual wage bill of 400 million, plus 300 million euros in other expenses. The average state railroad employee earns 65,000 euros a year. Twenty years ago a successful businessman turned minister of finance named Stefanos Manos pointed out that it would be cheaper to put all Greece’s rail passengers into taxicabs: it’s still true. “We have a railroad company which is bankrupt beyond comprehension,” Manos put it to me. “And yet there isn’t a single private company in Greece with that kind of average pay.” The Greek public-school system is the site of breathtaking inefficiency: one of the lowest-ranked systems in Europe, it nonetheless employs four times as many teachers per pupil as the highest-ranked, Finland’s. Greeks who send their children to public schools simply assume that they will need to hire private tutors to make sure they actually learn something. There are three government-owned defense companies: together they have billions of euros in debts, and mounting losses. The retirement age for Greek jobs classified as “arduous” is as early as 55 for men and 50 for women. As this is also the moment when the state begins to shovel out generous pensions, more than 600 Greek professions somehow managed to get themselves classified as arduous: hairdressers, radio announcers, waiters, musicians, and on and on and on. The Greek public health-care system spends far more on supplies than the European average—and it is not uncommon, several Greeks tell me, to see nurses and doctors leaving the job with their arms filled with paper towels and diapers and whatever else they can plunder from the supply closets.

All of which immediately poses the questions - who let them into the euro, and why were they able to get away with what basically amounts to a tax fiddle on a national scale?

The answers to those questions are "the other EU Member States" and "because nobody else wanted to allow over-close inspection of their own books"...which in turn suggests that the other Member States having to pay for the Greeks' excesses is frankly no more than poetic justice.

Also, apparently, it was the monks what done it.

cordially,
Scofflaw

Owldshtok

I remember hearing that it was more of an emotional heartache on one level for them than others joining the euro as they had the oldest currency in the world,drachmas.
They invented currency some 5000 years ago.

Let them off I say,look at all the great philosophers and mathematicians they gave to the world.They deserve a rest after all that hard thinking thousands of years ago.

RichardAnd

Owldshtok wrote: »

I remember hearing that it was more of an emotional heartache on one level for them than others joining the euro as they had the oldest currency in the world,drachmas.
They invented currency some 5000 years ago.

Let them off I say,look at all the great philosophers and mathematicians they gave to the world.They deserve a rest after all that hard thinking thousands of years ago.

What?

The first steps towards currency came from Sumer about 4000 years ago, not from Greece.

PseudoFamous

RichardAnd wrote: »

What?

The first steps towards currency came from Sumer about 4000 years ago, not from Greece.

I would have interpreted his post to mean Oldest currency still in circulation.

RichardAnd

PseudoFamous wrote: »

I would have interpreted his post to mean Oldest currency still in circulation.

Maybe but the Greeks most certainly did not invent currency at any point, let alone 5000 years ago.

beeftotheheels

Perhaps we could come up with a mutually beneficial solution to this with Greece and Germany.

We have a lot of Revenue officials who just have to be less busy than in the boom times and are costing us money. But, they have experience at running tax amnesties and may be a little less shocked by institutionalized corruption than say their German counterparts, in fact over the last 30 years or so we have gone from being a pretty non tax compliant society into a pretty compliant one.

The Greeks seem to be having issues collecting taxes.

The Germans are on the hook for the taxes the Greeks aren't collecting.

So, we second some of our Revenue officials to Germany to be deployed in Greece for a couple of years.

Revenue officers might enjoy a bit of time in the sun while making more of a difference than they currently can in Ireland.

We reduce our public sector wage bill for a couple of years.

Greece gets helpful Irish officials as opposed to confrontational northern European ones, and tax officials with experience of running amnesties to collect taxes as opposed to officials who think amnesties are letting baddies off the hook.

The Germans could always threaten to send in their own tax inspectors as the second wave to ensure that the Irish officials were seen as the helpful alternative.

Germany gets increased Greek tax compliance.

hinault

beeftotheheels wrote: »

Perhaps we could come up with a mutually beneficial solution to this with Greece and Germany.

We have a lot of Revenue officials who just have to be less busy than in the boom times and are costing us money. But, they have experience at running tax amnesties and may be a little less shocked by institutionalized corruption than say their German counterparts, in fact over the last 30 years or so we have gone from being a pretty non tax compliant society into a pretty compliant one.

The Greeks seem to be having issues collecting taxes.

The Germans are on the hook for the taxes the Greeks aren't collecting.

So, we second some of our Revenue officials to Germany to be deployed in Greece for a couple of years.

Revenue officers might enjoy a bit of time in the sun while making more of a difference than they currently can in Ireland.

We reduce our public sector wage bill for a couple of years.

Greece gets helpful Irish officials as opposed to confrontational northern European ones, and tax officials with experience of running amnesties to collect taxes as opposed to officials who think amnesties are letting baddies off the hook.

The Germans could always threaten to send in their own tax inspectors as the second wave to ensure that the Irish officials were seen as the helpful alternative.

Germany gets increased Greek tax compliance.

It's not a bad concept.

Our revenue people would have to familiarise themselves with Greek tax law though.

beeftotheheels

hinault wrote: »

It's not a bad concept.

Our revenue people would have to familiarise themselves with Greek tax law though.

I think that the tax law probably needs a bit of change which they could also help with. A major problem from the article the OP referenced was that too much tax relies on self assessment which we struggled with, and not enough on deduction at source (which has been our solution to failures in self assessment).

Civilized societies like the UK don't have any concept of a PAYE tax credit, yet we do. Why? Because it helped move us from having many self employed people with dubious compliance records to having many more people with compliant employers, Revenue have fewer people to deal with, and the people they deal with are the employers rather than the taxpayers so have no vested interest in not paying the tax. This is the kind of thing where I think our Revenue officers could really add value in the Greek predicament.

Getting our Revenue officers fluent in written and spoken Greek might be the bigger difficulty so they could be sure that they were on top of the situation.

Dannyboy83

beeftotheheels wrote: »

So, we second some of our Revenue officials to Germany to be deployed in Greece for a couple of years.

The Irish revenue have already tried to help them on numerous occasions.
My father was out there with the revenue in the early-90s, long before the euro.


Besides, our revenue officials are going to be kept mighty busy here for the next few years! I'm sure we could probably spare them plenty of people from the department of "State Expenditure Reform" (or whatever we're calling it).
Looks like they won't be getting work here any time soon!

Nijmegen

The Irish revenue is actually a highly efficient tax collection agency, by international standards. By Irish standards they blow most of the rest of the the state out of the water in terms of efficiency, innovation and effectiveness.

I suppose that's the terrible irony, the one part of our state you can hold your hands up and say is doing a great job is the one that takes the money. Pity about the ones that spend it.

Greece doesn't have a particularly strong tax collection culture, let alone mechanisms, and I remember for years speaking to some people I know living and working over there that this has been ever thus. Cash only rates from professionals like doctors and lawyers - you know you're in a state that has a big black economy when they're at it.

When the Greeks refer to raising taxes they might just mean collecting the ones that are already there.

Their taxes are low, so of course they feel its a massive imposition if the government takes more - even if the 'more' is just what's there already supposed to be taxed. But they need to grow up.

As for the Greek state itself, what a mess. It's almost a third world country in a first world setting, with the amount of waste, corruption.......

Prakari

Don't forget Goldman Sachs!
http://america20xy.com/blog6/?p=7226
A legal case in now being fought on this issue.

Today a chairman of Goldman Sachs, named Peter Sutherland, has suggested that the EU should gain more control over Ireland’s budget.
http://www.independent.ie/business/irish/ireland-must-cede-more-control-over-budget-to-eu-sutherland-2803454.html

Dannyboy83

Nijmegen wrote: »

I suppose that's the terrible irony, the one part of our state you can hold your hands up and say is doing a great job is the one that takes the money. Pity about the ones that spend it.

So very true.

I wish Vanity Fair would do an exposé, such as this, on "the ones that spend it" in the Irish State Sector.

beeftotheheels

Prakari wrote: »

Today a chairman of Goldman Sachs, named Peter Sutherland, has suggested that the EU should gain more control over Ireland’s budget.
http://www.independent.ie/business/irish/ireland-must-cede-more-control-over-budget-to-eu-sutherland-2803454.html

Peter Sutherland is the chairman of Goldman Sachs International, former chairman of BP, former board member of RBS, former chairman of AIB, Former director general of the WTO, former Competition Commissioner and former Attorney General.

The man is perfectly entitled to voice opinions, and those opinions should be viewed in light of his cv. To imply that his position as chairman of a subsidiary of Goldman Sachs somehow informs his view is just wrong, the man was one of the most successful (and powerful) members of the European Commission ever.

When he got the job Commissioner for Competition was seen as an unimportant role befitting a small member state with no clout, by the time he left the role Competition was one of the most sought after positions on the Commission.

z0oT

Leaving aside the inefficient overpaid public sector, lavish state spending, corruption, Goldman Sachs fraud and so on, I've always thought that it made little enough sense for Greece to enter the euro. For the simple reason that the weak Drachma made Greece more attractive as a tourist location, in tandem with a large portion of its economy tied up in tourism anyway.

I have many Greek friends and they've all told me things along the lines of being able to go out at night on around 1000 Drachma. (1EUR = 340.75GRD)

RichardAnd

z0oT wrote: »

I have many Greek friends and they've all told me things along the lines of being able to go out at night on around 1000 Drachma. (1EUR = 340.75GRD)

Interesting. But what would the average Greek have earned against that expendature? In other words, what was the average weekly wage in Drachma before the euro arrived?

Drumpot

Scofflaw wrote: »

All of which immediately poses the questions - who let them into the euro, and why were they able to get away with what basically amounts to a tax fiddle on a national scale?

The answers to those questions are "the other EU Member States" and "because nobody else wanted to allow over-close inspection of their own books"...which in turn suggests that the other Member States having to pay for the Greeks' excesses is frankly no more than poetic justice.

Also, apparently, it was the monks what done it.

cordially,
Scofflaw

This is exactly what I was thinking and really gets to the nub of the whole problem, not just in greece, but on a differant level Ireland in terms of cheap cash available to our banks.

The Germans/French EU blames Ireland and Greece for our own problems (and they are indeed correct in many cases), but what responsibility have they taken for their role in the fiascos?

If the IMF can get to the bottom of this information quickly, then why cant the EU before letting a country in ?

Scofflaw

Drumpot wrote: »

This is exactly what I was thinking and really gets to the nub of the whole problem, not just in greece, but on a differant level Ireland in terms of cheap cash available to our banks.

The Germans/French EU blames Ireland and Greece for our own problems (and they are indeed correct in many cases), but what responsibility have they taken for their role in the fiascos?

If the IMF can get to the bottom of this information quickly, then why cant the EU before letting a country in ?

Because the IMF demands access to your government's books before they'll lend, whereas the Member States didn't make that a requirement of euro entry - and the EU can't do what the Member States want it not to do.

Mind you, a point being made in the article appears to be that the Greek government's efforts to cook the books and unbalance the budget redoubled once they were inside the euro.

cordially,
Scofflaw

thebman

Scofflaw wrote: »

Because the IMF demands access to your government's books before they'll lend, whereas the Member States didn't make that a requirement of euro entry - and the EU can't do what the Member States want it not to do.

Mind you, a point being made in the article appears to be that the Greek government's efforts to cook the books and unbalance the budget redoubled once they were inside the euro.

cordially,
Scofflaw

Yes but their twisted logic of lets not look at our books before we do this begs the question, what is wrong with the other members books that they are unwilling to let anyone look at them?

Greece hid this problem for how long? No reason to suspect the other countries aren't doing it too to a lesser level.

Scofflaw

thebman wrote: »

Yes but their twisted logic of lets not look at our books before we do this begs the question, what is wrong with the other members books that they are unwilling to let anyone look at them?

Greece hid this problem for how long? No reason to suspect the other countries aren't doing it too to a lesser level.

Quite possibly so, although it would only require one member to refuse to accept it during the Maastricht negotiations for it not to have happened.

cordially,
Scofflaw

beeftotheheels

Scofflaw wrote: »

Quite possibly so, although it would only require one member to refuse to accept it during the Maastricht negotiations for it not to have happened.

cordially,
Scofflaw

I believe that it was actually the Germans struggling with the costs of reunification who objected to the notion of national ledgers being poured over by foreign bean counters.

Drumpot

Scofflaw wrote: »

Because the IMF demands access to your government's books before they'll lend, whereas the Member States didn't make that a requirement of euro entry - and the EU can't do what the Member States want it not to do.

Mind you, a point being made in the article appears to be that the Greek government's efforts to cook the books and unbalance the budget redoubled once they were inside the euro.

cordially,
Scofflaw

Seems a little odd to allow countries join the EU without some sort of prudent due process especially given the fact that a basket case like Greece could potentially ruin the whole project. But given the way they have continued to fumble from one disaster to another with no long term strategy to resolve the ongoing issues, its not really that surprising that foresight is something lacking by our european leaders!

Ah but sure, lets keep expanding the Euro/Eu project at all costs ! !

later12

beeftotheheels wrote: »

Perhaps we could come up with a mutually beneficial solution to this with Greece and Germany.

We have a lot of Revenue officials who just have to be less busy than in the boom times and are costing us money. But, they have experience at running tax amnesties and may be a little less shocked by institutionalized corruption than say their German counterparts, in fact over the last 30 years or so we have gone from being a pretty non tax compliant society into a pretty compliant one.

The Greeks seem to be having issues collecting taxes.

The Germans are on the hook for the taxes the Greeks aren't collecting.

So, we second some of our Revenue officials to Germany to be deployed in Greece for a couple of years.

Revenue officers might enjoy a bit of time in the sun while making more of a difference than they currently can in Ireland.

We reduce our public sector wage bill for a couple of years.

Greece gets helpful Irish officials as opposed to confrontational northern European ones, and tax officials with experience of running amnesties to collect taxes as opposed to officials who think amnesties are letting baddies off the hook.

The Germans could always threaten to send in their own tax inspectors as the second wave to ensure that the Irish officials were seen as the helpful alternative.

Germany gets increased Greek tax compliance.

I actually quite like this idea but I have two reservations with the amount of attention focused on Greek tax evasion.

The first is the magnitude of the Greek public debt and public expenditure, debt being in the region of EUR 300 billion, and ongoing expenditure still not being adequately tackled by the Greek cabinet. Until the expenditure is tackled, we are wasting our time worrying about taxation... even if the Greeks were as tax compliant as Ireland they would still be in trouble.

The second is the issue of the possible downside to increased tax compliance. Taxation is obviously not the creation of new and unused money, it is simply a method of shifting cash from one part of the economy to another. I am not quite convinced that the fugitive taxes, which are currently crossing store counters, stashed in handbags, and flowing through the arteries of the Greek economy would be better handled in the hands of the State than in the hands of the consumer. It is quite possible that these taxes-on-the-run are performing with far greater efficiency than they would be if they were being mashed through the Greek public service.