Plastic money to curb VAT evasion - The Best from Greece

The ingenuity of finance ministry advisors knows no bounds when it comes to collecting taxes by unconventional proxies.

 

After enlisting the Public Power Corporation’s electricity bills to slap the infamous 'special property tax' on all buildings hooked on the state provider's all-encompassing power grid, the government’s second-best option for collecting VAT taxes directly at the source of consumer transactions is the perennial credit or debit card.

 

As an incentive for citizens to start paying most of their bills with plastic money, the government plans to offer a 3 percent discount on VAT charges for every bill paid through credit of debit card instead of cash.

 

The normal VAT rates of 23 and 13 percent would thereby be reduced to 20 percent and 13 percent respectively.

 

The purpose of the new measure will be to collect the VAT directly through the banking system, thus preventing tax-evading traders from illegally withholding indirect taxes in their quarterly VAT return declarations.

 

Although the measure could be introduced without the incentive of a discount, in a country where the vast majority of consumer transactions are carried out in cash, the lower VAT rates would be an added incentive for many Greece to switch to electronic money.

 

Under the new system, the card-issuing bank shall withhold the VAT tax and hand it over to the state while paying the trader the net value of his sale.

 

 

In other words, the Greek banking system will take over the job of tax collector to stop rampant tax evasion by businesses great and small.

 

According to unofficial finance ministry estimates, some 200,000 enterprises have stopped filing VAT declarations altogether in the past 6 months of a deepening recession, thus depriving the state of 1.8bn euros in lost VAT revenues.

 

A recent OECD study showed that Greece fails to collect 30 percent of VAT charges compared to an EU average of 12 percent.

 

 

Finance ministry officials say that the measure is largely ready to be launched as early as January 1 if the political decision to ratify it is taken before New Year’s Day.

 

This would work conjunction with the implementation of an existing law which requires that all transactions above the sum of 1,500 euros be settled by credit or debit card and/or bank cheque as from January 2012.