Fighting corruption

A couple of years ago a friend of mine had some money to invest, and his thought was to exploit a plot of land that he already owned, build about 8-10 apartments, keep a couple for himself and sell the rest. In a different lifetime, this used to be quite a good way to invest your money in Greece. Today you’d better hang on to every cent you have got, but that’s a different story.

My friend happily built away. The project finished and business bloomed. He sold quite a few apartments and made some money along the way. Only four remained unsold, and the only decision that remained was which ones to keep.

He prepared his annual tax declaration for 2008 and as a citizen of good faith detailed all data relevant to his undertaking. In this country, the attitude towards tax authorities is intensely defensive: The golden rule is to keep and maintain a low profile. You don’t want them taking second and third looks into your affairs, because they are bound to find something devastating that they will be able to turn against the most law-abiding citizen. You keep things simple and clear, in order to avoid having to submit additional information.

Being a young generation guy, my friend was very enthusiastic about the fact that tax authorities had recently begun offering the option to citizens to submit their tax forms via the Internet, and that was exactly what he did. He advertised its simplicity to me on a number of occasions, and we praised the government for such forward thinking.

In October last year, a tax official called him and implied that some clarifications were needed. He suggested that my friend would visit him at his office on the following Monday, which was St. Dimitris day. This also happened to be the tax officials name day – a day when presents are given. My friend wondered a bit about this coincident but he followed the “advise”. As soon as he entered the office of the tax official, he saw himself confronted with a very grumpy guy asking lots of questions about the construction. The suspicion was voiced that my friend was not an individual investing his savings, but in reality was operating a construction company that he just didn’t declare as one. Such a company would belong to a completely different tax regime.

Upon my friend’s wonderment why anyone would get the idea that such a complicated scenario could apply, the tax official replied that ONLY people who have something to hide would submit the tax forms via the Internet. There would obviously be a price if he were to not ask further questions. After some toing and froing it was agreed that the tax official would receive 3000 Euros immediately, and another 3000 Euros at the beginning of the next year. My friend felt that this agreement was the only way to get the tax official off his back. At the same time, there was no guarantee that this blackmailing would stop.

Since the first payment a few months ago, Greece has been the center of a massive financial crisis that threatens the whole EU. The government is implementing many new and serious measures to reform the economy and reduce public spending, including a radical reform of the taxation system.

The second payment of 3000 Euros was due last week. Some days ago I received a triumphant phone call of my friend. The government had officially implemented the following measure to counter corruption:

Whoever points out blackmail by tax officials to the authorities will receive five times that amount from the authorities and will receive full tax immunity. My friend has been waiting for a phone call from the tax official who blackmailed him ever since with a smug smile on his face, and is almost sad that his phone remains silent….

Update: Also read this Spiegel article to put things into perspective…