On December 13th Poul Thomsen, the chief of the mission of the International Monetary Fund, held a telephone conference with members of the press, summarizing the Fund’s assessment of the current economic situation in Greece, published on the same day.

Poul Thomsen suggested that Greece has relied too heavily on raising taxes in its efforts to close the national budget deficit, saying that the country has reached the limits of what can be achieved through tax hikes and new tax measures. According to the IMF, in the future Greece will need to shift its focus to expenditure cuts and more efficient use of government resources, when looking to improve the country’s fiscal balance.

The IMF’s assessment of Greece found that overhauls to the tax system planned by the government in 2011 were running behind schedule, and none of the measures were shown to be effective enough to make a significant positive impact on the national financial climate.

It is not yet clear whether Greece will need to impose even further austerity measures in 2012, although the IMF is already saying that under current conditions it is likely that the government will miss its target of reducing the budget deficit to 9 percent of the GDP next year. However, according to the report the country’s battered economy is already struggling under the repeated austerity packages, and further measures might only serve to buckle the economy more.

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According to a report published on November 17th by the European Commission, Greek tax authorities currently have a backlog of approximately 165 000 pending tax investigations. The yet to be resolved cases involve a cumulative amount of EUR 81 billion in unpaid personal and corporate taxes. Taking into considerations the current socioeconomic climate in Greece, only approximately half of the owed taxes are considered to be even theoretically recoverable, with the report claiming that EUR 8 billion is a more realistic estimate of the unpaid taxes that would likely be recovered in the near future.

The authors of the report also commented on the overall Greek tax system, saying that the country needs to quickly set about creating modern and automated debt collection procedures, and new methods of tax collection and compliance will need to be instated to ensure that taxpayers with unpaid taxes comply with their yet to be met obligations.

On a positive note, the report pointed out that Greek tax authorities are now engaging in negotiations with Swiss tax authorities, in a bid to address the issue of Greek taxpayers using Swiss bank accounts to escape tax obligations. According to estimates widely published by the Swiss media, approximately EUR 282 billion is currently hidden away in Swiss bank accounts on behalf of Greek taxpayers.

Earlier in the week Greek tax authorities revealed that tax collections for the first 10 month of 2011 were 4.1 percent below levels seen during the same period in 2010. The drop indicated that the country has not had success with its renewed efforts to enforce tax compliance, despite a series of new measures aimed directly at addressing tax evasion.

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In an address to international media in Berlin on September 27th the Prime Minister of Greece George Papandreou announced that Greek taxpayers will soon face a new property tax. The announcement was made only hours before the Prime Minister was scheduled to hold talks with German Chancellor Angela Merkel regarding further bailouts for the debt stricken Greece.

The new tax will be levied on all residential properties in the country, and will need to be paid alongside taxpayers’ electricity bills. Failure to pay the tax will result in electricity being shut off to the respective property. According to the Greek government the new measure will be easy to implement but hard to evade. It is estimated that the new tax will cost the average Greek household up to EUR 1 500 per year, which could raise Greece’s annual tax revenues by EUR 2 billion. If the projected collections levels are realized, the government could reach its deficit target of EUR 17.5 billion.

The new tax was passed through parliament with 154 votes in favor and 146 against. Following the parliamentary voting sessions, several Members of Parliament said that while they voted in favor of the tax, they did so with a heavy heart and much debate. The passing of the new tax is being seen as a first step for the Greece in meeting budget targets needed to receive further IMF funding, and restoring stability to the European credit market.

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In a bid to assure international creditors of Greece’s ability to meet its outstanding debts, the country’s government has revealed that a new property tax will soon be instated in an effort to raise approximately EUR 2 billion per year more in tax revenues. The announcement came on September 11th in a statement made by Finance Minister Evangelos Venizelos, after a meeting of the Cabinet.

The Minister explained that the tax would be collected alongside householders’ monthly electricity bills. The tax will be levied on the size of the property, and charge an average of EUR 4 per square meter, with rates varying based on the quality of the location.
According to international analysts, in order for Greece to raise the revenues necessary to close its budget gaps, the government must decide upon an easy to implement tax, which could be deployed rapidly, and would not add to further civil unrest. At this point, the property tax is the only measure that matched all these criteria.

The proposal for the new tax will be submitted to parliament on October 3rd, as part of the country’s upcoming budgetary discussions, with voting on the finalized plan scheduled to be held by the end of October.

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Early on July 18th German media sources reveled that Eurozone leaders would discuss a new bank tax at a summit scheduled for July 21st. Later on in the same day the European Affairs Minister of France Jean Leonetti confirmed that the bank tax is a topic that would be discussed at the meeting. The new levy is being investigated as a means to easily raise funds for a second round of bailout payments to the debt-stricken Greek government.

The Minister explained that a bank levy was being considered by policymakers, as such a system would not significantly interfere with the operations of banks across the EU, and would have a relatively low chance of triggering a debt default in Greece. When questioned on the likelihood of the tax being instated in the short term, the Minister said that the idea deserved to be studied. As an alternative to the tax, investors who hold Greek government bonds may be asked to “roll over” on their investments. However, it is feared that this option will increase the chance of mass debt defaults, and exasperate the economic woes of other financially troubled EU-member states, such as Spain and Italy.

If the bank tax is instated, it will be levied across all banks in the Eurozone, regardless of whether the financial institution has any investments or dealings with Greece. However, the exact rate and nature of a potential tax is still undecided. It is also unclear exactly how the raised funds will be used, but the Minister indicated that a government bond buyback initiative is likely.

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