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Greece will need a third bail-out

By Kitty Miv
29 August, 2013


Finally Greece is showing some faint signs of getting to grips with its dysfunctional tax system, overstaffed, corrupt and ineffective as it is, closing some of the island offices which were running out of control. For anyone coming from a "normal," fairly law-abiding Western democracy, it's hard to get one's mind around the chicanery and outright theft that characterized the old regime. The best model to think of would be the system of "tax-farming" used by mediaeval monarchs: you appoint me to collect your tax of one mark per acre of land; you won't pay me anything because you know I'm going to cheat you of one third of the overall yield, and another third is going to stay in the hands of the tenant, as his reward for letting me steal my portion. Except that under the Greek model (imagine trying to police all those thousands of islands) the tax collectors were paid anyway. So it's no surprise that the tax officials unions are out on strike. Needless to say, the unions' remedy for the situation is to hire yet more tax collectors!

The decision of the Greek Government nearly two years ago now to collect its new property tax through electricity bills says it all. And it's still doing it that way. Then came the shocker of the "Lagarde" list, incriminating wide swathes of the governing class, who had been helping themselves to their share of the proceeds of corrupt administration and putting the money in Switzerland. So what did the Government do when it got the list from the IMF? Why, they tore it up, of course! An International Monetary Fund (IMF) report in May identified a need "to remove completely political interference from revenue administration" in Greece. The results of a reasonably impartial inspection of tax-gathering carried out earlier this year showed that up to 85 percent of businesses were evading taxes, particularly of course on the islands. The inspections followed a visit by European Tax Commissioner Algirdas Šemeta to Greece in June. Addressing the Greek parliament, Šemeta called for a "zero-tolerance policy against tax fraud and evasion," and he complained that progress toward improving debt collection and the auditing of wealthy taxpayers remained slow.

Last week Troika officials began to say publicly what has been evident to most people for months already, which is that Greece will need a third bail-out. What's also evident to most people, especially the German tax-payers who are footing the bill for Greek games, is that this exercise in the public squandering of billions of euros should never have been begun, and should be stopped right now. Especially piquant is the thought that those parts of the bail-out money that are being stolen in their turn (any guesses as to the percentage?) won't even be going to Switzerland, and at least therefore staying in Europe, but will be on their way to Singapore or Panama, due to the transparency now applying to European financial transactions.

That, by the way, you'll be surprised to learn, was the award of a bouquet to Greece, which may finally be turning the corner, and another country showing signs of redemption is Mexico, although it's best not to lift the lid and look too closely. The jury is still out on new President Enrique Pena Nieto: he has good intentions, we verily believe, but it's not clear yet that he has the political and personal strength to face down the forces of darkness. At least now he is grasping the nettle of PEMEX, saying that private companies will be allowed into joint ventures for the development of new oil and gas fields. Well, you could say that he has no choice, given falling yields from PEMEX's existing antidiluvian operations, which have been milked for decades for . . well, we won't go there. The problem of course will be that, while Pena Nieto may be a trustworthy partner, he is only an elected politician, and Mexico's history does not engender confidence in its reliability as a venture partner. And looking around the world, governments have not been the best partners to have in oil and gas. Venezuela and Russia are just two of the more egregious examples, but there are plenty of others.

 

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