Greek debt crisis - report - 
Article published the Thursday 17 June 2010 - Latest update : Sunday 20 June 2010

Everday corruption costs Greece billions

Prime Minister George Papandreou has said that corruption costs Greece billions of euros a year
Reuters

By Sarah Elzas

“There is no one in Greece that has not bribed a doctor.” This statement from a man sitting on his balcony, smoking a cigarette in a suburb south of Athens. It is difficult to find anyone here in Athens who does not admit to some kind of corruption.

He admits to giving cash to the doctor who was caring for his pregnant wife. Not quite a bribe, he says.

“I paid him under the table, so that he wouldn’t declare it as taxable income.”

Tax evasion is rampant in Greece, with independent workers, like doctors, often not declaring their revenue, or underreporting income in order to stay in low tax brackets.

Some regulators estimate unpaid taxes cost the Greek government some 40 billion euros a year.

Complicated laws and easily-corruptible auditors are part of the problem, explains an accountant in Athens. Like most people willing to talk about this subject, he prefers to remain anonymous.

He earns his living helping businesses avoid taxes. He uses every legal method available, but sometimes legal is not enough.

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He calls himself “the chef”, cooking the books so his clients don’t have to pay VAT, for example. But of course, after a few months of not paying, these companies come to the attention of tax auditors

“And when the auditor comes, they pay him,” says the accountant.

“There is a price list: if you owe 100,000 euros in taxes, you pay 10,000 euros to the auditor – ten per cent,” he explains. This goes up exponentially, the more you owe, the more you pay the inspector. And it gets handed over directly in cash, often by him.

“In envelopes, money bags, suitcases!” he says. “They usually get in your car in a corner, and they jump out in the next, with the money. No talking, nothing.”

He says bribing auditors is so common that deciding not to pay taxes has become a business strategy. When things are slow, you just don’t pay.

After 16 years, this accountant has become disillusioned with the work and would like to quit, but he does not see what else he can do. And not everything he does is illegal.

“If you sum it, I’ll do that kind of work 30 days per year,” he says. “But it colours everything.”

For him, the solution is simple: institute a flat tax. This could put a lot of people out of work, as businesses that cannot actually afford to pay taxes could go under, he says, but it might be a good thing.

“We have 875,000 companies, and 450,000 freelancers and small businesses,” he says. For lack of other options, most people finish school and start their own business. “If you go to a square you will see 15-20 stores selling the same thing. They are making little money, and they cannot pay their taxes.”

A flat tax might solve some of the problem, but bribable tax auditors are just the bottom rung of a long ladder of corruption in Greece. Indeed, several politicians – including a former prime minister – have been accused in recent weeks of taking kickbacks in return for government contracts.

The General Inspector for Public Administration is charged with looking into corruption and misappropriations in the public sector, from local authorities who accept bribes to issue drivers licenses, to large-scale fraud in the health system.

Today, as Greece has come under increased outside scrutiny and under pressure to save money in order to pay off its massive debts, the office is being called on more and more

“In last months I have had many, many questions from different ministers,” says Leandros Rakintzis, a former judge who became Greece’s first General Inspector in 2005.

The eight special investigators who work in the office do not look into politicians, but they can investigate anyone else in the public sector. They had 950 cases in 2009, 185 of which were sent to the public prosecutor. Almost 300 others resulted in disciplinary action.

It is, of course, impossible to know exactly how much corruption there is - until it is actually discovered. Rakintzis says he does not keep track of it himself, but he says studies that have put the cost at about 20 billion euros a year are probably pretty accurate. Some put it higher.

Much of this corruption is on a low level, like local tax auditors accepting bribes from small businesses.

One recent high-profile case involved surgeons in a large public hospital in Athens. The office examined over 2,000 medical records and found evidence that surgeons had been treating private patients in the public hospital, which was footing the bill. They singled out 32 doctors, whose cases were handed over to the public prosecutor.

Dinaki Fortula, a special inspector specialising in the health sector who took part in the investigation, says medicine is full of mismanagement, because doctors mainly work independently.

She and her colleagues are often shocked at what they find.

“We don’t believe that there can be such people, we don’t believe it,” she says, shaking her head in wonder. “I couldn’t do it if I was in their place.”

She hopes the current crisis might push things to change, shedding light on bad administration.

“We have a chance and hope right now to change our culture in the public sector,” she says. "We have a chance to transform the difficulties into opportunities... we have to be optimistic."

tags: Corruption - Economic crisis - Greece - Tax
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Comments (1)

Corruption in Greece

Corruption is often sited as the "normal" way of life in Greece: "Everybody is tax evading". Now that Greece is crashed seems logical that everyone must pay for the huge debt. For so many years drachma was engaged in marriage with inflation (reaching 27%) and this was the biggest problem in the country`s economy. Then a set of events unveiled: massive illegal immigration, extermination of the ever growing inflation along with drachma, adaption of euro and finally the Olympic Games. The first two, namely the vanished inflation and drachma were modern "miracles". Politicians were proud for the Greece`s strong economy they had created proved by the entrance into the EMU. Greece was not a small poor country anymore as managed to get in to the the strongest European economic club. This was suspicious. Illegal immigrants - cheap hands - , the euro - super stable currency - made Olympic Games a very profitable enterprise. Recently Siemens` scandal along with the "book cooking" revealed that that both Greece`s strong economy and the Olympic Games belonged in two opposite realms: ancient myth and actual bribery. ... One don`t need to have Jules Verne`s imagination to think that in a so vulnerable political environment other illegal transactions between politicians and private businessmen on the huge Olympic project - stadiums, roads etc - must have happened. While all this was on the way another huge scandal came on: The stock market scandal. An amount of about 100 eu billions changed hands - the small investors were the big looser - . I can recall the Minister of Finance advising people on TV to buy shares of the boosting stock market...
Finally the Olympic Games left behind a public debt of about 11,5 eu billions... Strong economy is transformed into a bailout. Illegal immigration into hookers, drug dealers and users. The profiteers has transfered their money out of the country and many of the politicians involved in the aforementioned bribery are inside the Parliament defending public`s interest.
Go on then: Ask the 700 eu worker or the 400 eu pensioner to give money for the common debt. Forget all this and underline the everyday corruption and the shoemaker`s tax evasion. Make the poor payback the debt or the equivalent of some politicians` or businessmen`s accounts that flourishing in the off - shore paradise...

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