Tag Archives: tax fraud

The honest truth about dishonesty… and tax evasion

I recently watched this short animated video on Dishonesty.

I immediately started drawing parallelisms between the video and the whole Greek tax-evasion story. In many discussions with foreign journalists I have been asked to give my opinion on tax-evasion in Greece. It’s true that Greek citizens were inclined to evading as many taxes as they could and, to tell you the truth, they were feeling pretty fine with that. Why? Because the model was coming from above, from the political establishment and the business elite. They were and still are setting the example. The international press has only recently discovered the laters’ responsibility, hence the amount of articles and features on the lives of rich Greeks.

The RSA video gives an example of how the overall damage by numerous small cheaters can sometimes be bigger than the total damage of a handful of big cheaters. I sincerely believe that this is not the case for Greece. Credible data are not available to demonstrate that the amounts lost by the political establishment and the business elite’s practices are much bigger than the amounts lost by buying something without a receipt. And, in addition, many of the cases are much more complicated and at some point we are talking about a sort of a “double entry” to our tax-evasion database. For example, where do you categorize the damage of a lost public income from an unpaid tax fine? Under the citizen who did all he could to avoid paying (small cheater)? Under the tax officer who accepted the bribe (medium cheater)? Or under the politician who intervened to the local tax office so that the citizen, a friend (i.e. a potential voter) gets treated with preference (and yes, he is a big cheater because he is hoping for thousands of votes to get re-elected)?

In September 2010, the then vice-chairman of the Greek government, Theodoros Pangalos, has given the following speech at the Parliament.

Translation: The answer to the people’s angry question that is directed against the politicians of the country “how did you eat [spend] the money?” is this: We hired you. We ate [spent] them all together. In the framework of a relationship of political clientelism, corruption, buying and ridiculing the very sense of Politics itself.

Speaking about the responsibility of political clientelism in the Greek crisis, though true, he unashamedly blamed the small cheaters (i.e. voters) in order to cover the big cheaters’ (i.e. politicians) damage. Paradoxically he fell in his own trap by admitting that he is a big cheater. It was such an unashamed statement that he even created a website where people would input their own stories. And in the end he turned the whole story in a book which is sold on the website.

In what society do leaders depend on individuals to set a prudent example for the politicians?

It’s this unanswered puzzle, that will never be answered in consensus, that has prevented any move forward to be fully legitimised, especially when the move forward is driven by the same people who brought us here. Society was, is and will be strongly divided among these things, left or right, cheater or honest, public sector employees or private sector employees, clean or dirty means of accumulating wealth, what did you or your father do during the good years, etc (the duos’ list is almost infinte).

It seems that these divisions are here to stay. There are few attempts, and certainly not from the politicians’ side, to ease them (see the recent strike of the Athens Metro employees where it was attempted to turn passengers against strikers). They actually take advantage of these natural and artificial divisions, turning one part of society against another, which explains why the traditionally angry rioting Greeks have not been able to form a common front in order to create a “new page” as the video suggests. And we so desperately need a “new page” in order to re-start writing our history. Looking at some international examples, nations with a dirty past opened a “new page” with the creation of a Truth Commission (e.g. South Africa). We, in Greece, haven’t even dared to launch an independent audit about our public debt. The former-communist countries had another tactic. A process that was called “lustration“, i.e. a cleansing.

Well, we need one too in order to inspire people to become honest again. Like their politicians.

PS. Funnily the RSA video refers to the financial crisis at the end too.

Spinellis sued

Remember professor Diomidis Spinellis?

Well today he tweeted that he was sued by Charalambos Nikolakopoulos, chairman of Tax Office employees’ trade union (POE DOY) after Spinellis gave a speech at a conference on “Tax Evasion and Social Justice”. In his speech Spinellis referred to “widespread corruption in the tax collecting mechanism” – a reference for which POE DOY now accuses him of libel.

Diomidis Spinellis' tweet

The Tax Office Employees’ trade union, in its statement, said:

The period of silence and attacks against our Federation, has gone for good. From now on we will react with all available means to defend the honor and reputation of hard working tax service employees. Let those, who (for many years) have thrown their political and administrative responsibilities on the tax service employees, understand the message.

It’s a strange statement, sounding more like a bullying or a blackmail. For some people the mere reference to political responsibilities might look as an indirect admittance of being guilty of corruption. It’s like saying “if you keep putting the blame to the corrupt tax office employees, we’ll disclose the names of politicians and their administrative puppets who were involved in this corruption“.

Mr. Spinellis created a page where he invites people to tell their own personal story of corruption in their transactions with the Greek Tax Office. He intends to use these stories in his defense at court. The page can be found here, it’s only Greek.

Tell your personal story on corruption at the Greek Tax Office.

Mindmapping Greece’s tax evaders

One of the biggest problems of the Greek economy is tax evasion. If you ask any ordinary Greek he’ll tell you several cases of tax avoidance that he knows. I recently read the story of Professor Diomidis Spinellis of Athens University of Economics and Business. In 2009, the Greek Ministry of Finance hired Spinellis in an attempt to organize the approach to tackle the problem.

Spinellis tackled the problems like it was programming challenge. He made something called a mind map. A mind map looks like a tree, and it maps how your brain works. And Spinellis’s mind map illustrated in a precise, clean manner why Greece is missing so much of its tax revenue.

An example of a mind map (By Paul Foreman)

First on the mind map. Locate the tax evaders, he thought, and improve tax collection. It should be easy, because wherever he looked in the data, he saw tax evasion.

Spinellis’s program found hundreds of thousands of cases of potential tax fraud.

Greece has three hundred regional tax offices. Spinellis thought the solution was simple. Share the data with all of them and wait for the revenues to come flowing in.

Nothing.

Most Greeks will tell you there is widespread corruption in the tax offices. Collectors take bribes. So Spinellis added a new item to the mind map. Management issues at regional tax offices.

Spinellis wrote a small program that would extract each day’s performance data from every single tax office. It recorded information on how much revenue was collected, how many cases were closed, the number of days it took to close a case, etc. It also kept a list of the tax offices that had not closed a single case that day. There were hundreds of them.

The program sent an email every single afternoon to the finance minister and every tax collection office, reporting which offices did absolutely nothing that day. And still, days passed with no action.

The whole idea behind Spinellis’ project was so simple that one can wonder why the Greek Finance Ministry hasn’t thought of it until now. Why wait until 2009 to organize the country’s tax income? And why hire someone outside the Ministry for something so simple when the Ministry and the Tax Offices employ several thousands of people?

It is around this point, two years in, that Spinellis had a disturbing thought. A new item on his mind map. Fixing Greece’s tax system, and ultimately making the Greek economy work, was not a matter of tweaking his computer programs. It was not an information problem. It was a culture problem.

If the people don’t want to pay taxes, the collectors don’t want to collect, and the politicians don’t want to punish them, perhaps Greece needs more than a mind map.

At the end of 2011, Spinellis resigned from his government job. He’s back to teaching.