Tax Break

John Fisher, international tax consultant

Archive for the tag “Greek bail-out”

Trying to keep the relationship platonic

Following the recent news of Greece’s continuing woes, and thinking about what to write, I soon realized that very little has changed since I penned the two Posts below in 2012. The country’s new whacko Government has won a reprieve from a fatal dose of international hemlock by promising to come up with alternative measures to meet the ‘Troika’ demands for a formal extension of its bail-out package. It looks like the great deficit-plug is to come from the ruthless prosecution of tax evaders (ha, ha). Indeed, a former finance minister went on trial yesterday for allegedly removing relatives’ names from a list of unreported offshore bank accounts (see Post from 2012 below – and ponder the relative amount of time it took to get him and the whistleblower to court). Furthermore, another former finance minister received a four year sentence last November for undereporting his income, although ‘four years’ subsequently turned into a €14,500 fine (the annual price of freedom in Greece, it turns out, is €3,625. Cheap at half the price). In short, Greece continues to be a hopeless case. The only question is whether foreign creditors are actively engaged in allowing the wool to be pulled over their eyes. Read on (I apologize in advance that you may be seeing this again in 2018):

Olympic spirit lost

My trip to New York cancelled last week courtesy of Superstorm Sandy, I decided to take advantage of the hour before anyone realized my calendar was empty to clear my desk. Forgetting the utterly ignored disposable cup of coffee nestling under a sheet of foolscap, I watched in helpless horror as it tipped drunkenly on its side and lazily cast forth its contents over my diary and neighbouring assorted papers. My barely legible handwriting disappeared as the ink, dissolving into the coffee, was dispersed across the open page. Taking a leaf out of the book of the intrepid New Yorkers, by midday I had a spanking new diary and only the merest hint of brown on numerous documents newly piled at the edge of the desk.

The experience took me back 40 years to the summer of 1972 when we were just finishing 8th Grade (in England it was called the 3rd Form which was a bit confusing since we had already had one of those several years earlier). Our Form Master was Severus Snape minus the charm with whom one messed at one’s peril. Of course, as healthily idiotic teenage grunts we messed at our peril – but we all knew our limits. All of us, that is, excluding one. There is one in every class. A totally incorrigible youth with no academic aspirations who is programmed to kick back at all cost against authority. Civilly disobedient – Mahatma Gandhi without a cause. Anarchic without knowing the meaning of the word. Angry young man who wasn’t even angry. If we were told to write the address on our report envelopes in the centre, he wrote it in the top left-hand corner. If we were told to sit down, he stood up. Told to write in pencil, he wrote in ink. You get the picture.

In those days part of the daily ritual was the redundant task of calling the register to corroborate the evident fact that, while so-and-so’s desk was clearly empty, he (we were all He’s) was not hiding somewhere else in the room. Each morning the dreaded Commandant would labour through the 31 names and mark squares on that term’s page with an alternating diagonal pencil-mark producing, over time, a herring-bone effect that was quite aesthetic. Trusting in his absolute power over us, the register was left in his unlocked desk – a Holy Ark that we assumed, if touched, meant instant death.

Then came that fateful morning when our revered leader marched to his desk, removed the register, opened it, fell totally silent, shook with rage and then sat down with his head buried in his hands. Carnage. Somebody (guess who) had poured an entire bottle of Parker Quink over the sacred tome. I don’t remember precisely what happened next but, despite the temptation to embellish the story, I am pretty sure there was no blood and there was definitely no ambulance.

Why am I writing all this? Because the European Union appears these days increasingly like a class of juveniles. And no prizes for guessing the incorrigible country. They were at it again last week.

Last Sunday, the editor of an investigative magazine published a list of over 2000 names of account holders in the Geneva branch of HSBC bank and was promptly arrested for breaching privacy laws. What is more, in a show of absolute legal efficiency, he was brought to trial on Thursday and, equally promptly, acquitted of the charges against him.

This all sounds quite impressive, if a waste of taxpayers money, other than for one thing – all the actors in this little play were Greek. The list, transferred to the Greek Government two years ago by the then French Finance Minister and now Head of the IMF, ostensibly pointed to wealthy Greeks who may be running a sideline in tax evasion. Somebody (the hot potato is now passing between former government ministers) stuck it in a drawer and “forgot” about it. Meanwhile, as I noted on this blog back in February there are (or, at least, were) over 165,000 (one hundred and sixty-five thousand) cases awaiting trial in the Greek court system. But they still managed to get this guy up in front of the Beak within 4 days.

I am not a lawyer and I do not know how heinous it is to breach someone’s privacy when it is in the public interest (if I am not mistaken Woodward and Bernstein did something similar 40 years ago that rather inconveniently brought down the President of the United States – and nobody tried to put them in the Electric Chair). However, even I know that there is something absolutely heinous with the government of a country that is struggling on the ropes with its budget deficit, not pursuing tax evaders. The fact that this case was taken to trial so fast is not heinous – it is just a sign of how morally bankrupt and obviously beyond the pale Greece is. I had goose pimples when the current Greek Front Man, Antonis Samaras was praised by Angela Merkel in Berlin. I know that a Greek exit from the Euro would not be simple for the creditor nations and that fact is heavily influencing Germany’s approach. But sometimes the school principal has to realise that it is not enough to make the errant youth write a thousand times “I must not tell lies in class” or “I must keep my promises”. If he proves himself totally incorrigible he needs to be expelled.

The Greeks like to keep telling us that they are the cradle of modern civilization and also the inspiration for the world’s greatest sporting event – the Olympics. Agreed. And what is the greatest problem facing competitive sport in the 21st century? Doping. Greek governments have been “enhancing” their statistics and breaking their promises, rather than records, for years.

It is clearly time to expel Greece from the Eurozone and disqualify it, for a period of several years, from the benefits of EU membership.

The Greecy pole

When it was suggested last week by a sympathetic BBC interviewer that the Italian government’s decision not to fund Rome’s bid for the 2020 Olympic Games had cost Italy the chance of taking its place on the world stage, the interviewee retorted sharply “Italy has been on the world stage for 2000 years”. Meanwhile, the Greeks keep reminding us that, as the cradle of democracy and western civilization, their continued hammering by the European Union is beyond comprehension. We should be thankful, at least, that the Germans have not yet chosen to harp back to the past.

Greece really does appear to be sliding down a greasy pole. The new government has continued its predecessor’s vain attempts at improving tax collection while trying to make new taxes stick in a country in which, thanks to rampant corruption, tax evasion is effectively state sponsored.

On January 22, a list of 4152 tax cheats was published in an effort to shame people – they must be joking – into paying up. Most fascinating was the fact that, even though the authorities know where they live, most of them have not been prosecuted. This is evidently thanks to there being a backlog of 165,000 cases in the courts. One prominent exception is, top of the list, Nikos Kassimatis (an accountant!) with an amazing 952 million euro owed, who is currently serving a prison sentence for VAT fraud which has probably taken away his appetite to settle. In a country where the judiciary clearly has a problem getting its act together, this may not be a case of the punishment not fitting the crime but – to put it in perspective – had he been convicted just before Henry VIII became King of England in 1509 he would be looking at walking free about now (not allowing for a couple of hundred years knocked off from his 504 year sentence for good behaviour).

An earlier list of 6000 major corporate delinquents was made public in September 2011. First prize went to the Hellenic Railway Organization which was running incredibly late with an unpaid tax bill of a whopping 1.26 billion euro – a real achievement given the fact that its owner is none other than the Greek government.

The now famous aerial inspection of houses with undeclared swimming pools, reported as carried out at great government expense by helicopter surveillance when the same result could have been achieved on Google Earth, has at least caused economic growth in the form of an increased demand for camouflage material. It has not been reported whether swimming pool owners have been paying cash for these purchases.

Meanwhile, while various officials have been forced out for either having their palms greased or turning a blind eye to the actions of others, the government came up with two quite ingenious methods of improving collection. Firstly, the new and much hated (along with every other) property tax is to be collected through household electricity bills. Non payment would result in disconnection from the National Grid and, in winter, death from hypothermia. Secondly, there is some madly complex , novel system using a smart card that enables the authorities to track a taxpayer’s payments. In keeping with Greek tradition, use of these cards is voluntary although it is not clear why the authorities don’t just start by looking up the names on that tax dodger list in the telephone directory and go knocking on their doors.

Alongside tax collection, privatization and reduced salaries, Greece has also been told by the EU and IMF to revamp its tourist industry. Knowing the Greeks’ record on compliance, left to their own devices, this will probably result in a new set of floodlights for the Acropolis and creation of more , euphemistically titled, clothing-optional beaches where German tourists can get an all-over tan while they are being burnt at home by the forced write-off of Greek sovereign debt.

Waltz or requiem?

Trust? Yes I could set you up one of those for a suitable fee

I was in Vienna last week for a European tax conference. Inevitably, the Eurozone crisis loomed enormously large but, in addition to the crop of European experts, there were speakers from China, Africa and the US to remind participants that Europe is not an island. Throughout the two days there was one word that refused to lie down. It kept popping up in just about every speech or comment. That word was “Trust”. The need to restore trust between nations in Europe. The need to restore trust between governments and their electorates. The need for trust in forming companies’ tax policies. The need for trust between tax authorities and taxpayers. The keynote speaker was a brilliant financial journalist, highly prominent in her field, with a PhD in Social Anthropology who set the tone for the entire conference.

Overall, the vision was remarkably optimistic. Faced with economic armageddon in Europe, EU nations from North and South will understand that they need to cooperate. With the stampede of government changes at the polls voters will regain confidence in the executive branch. Faced with the nagging protests via social media and Occupy the World movements companies will abandon over-aggressive tax planning and adopt ‘moral’ tax strategies. With the prospect of never-ending tax disputes and lack of certainty companies will come forward and expose themselves to real time tax audits while tax authorities will be put on a leash to stop them going for the taxpayers’ throats.

And they will all live happily ever after.

Not quite.

All men are created equal – but it doesn’t mean they are the same

In what I can only put down to western Europe’s post Holocaust obsession with, what itself can only be euphemistically referred to as, ‘political correctness’  everybody ignored the elephant in the room – and that elephant was cultural diversity. Different cultures have varying views on what constitutes the truth, fairness, morality – you name it. The only speaker I heard touch on the subject was the Chinese guest who suggested that companies’ approach to national tax authorities should depend on the nature of the executive, judiciary and tax authority in a particular country- but then until two years ago it was politically correct to be executed for tax evasion in China.

You can talk until the cows come home about building trust vertically, horizontally or three dimensionally – but, to put the matter in perspective, I would have happily challenged any of the speakers to convince the average Greek in the Street that he has a moral obligation to pay tax. For crying out loud, one of the  speakers was the geezer who wrote the Liechtenstein Tax Code which, although I have not yet set aside the 5 minutes  required to read it (rumour has it that he wrote it while traveling in an elevator), must surely be full of trust and  love to all men. Another guest was a former finance minister of Greece (I understand there have been quite a lot of them)  who, on the odd occasion he was coherent, expressed absolutely no remorse for anything that had happened and looked forward to  being bailed out by Germany, despite the fact that successive governments lied about their statistics.

Stunning! But Mozart must have turned in his grave

If, to survive, the Eurozone needs to look for a single European cultural standard, then surely Austria should lead the way. Austria, of course, is a synonym for culture. It is, simply put, a cultural paradise. What nation could be more appropriate?  A quiet economically strong country, its people are the epitome of politeness. From the minute I boarded the Austrian plane my ears were massaged with Strauss’s Blue Danube Waltz. The service was perfect. Viennese architecture is absolutely breathtaking and, as an American colleague commented to me while  we admired the Throne Room of  the Hofburg Palace , “We don’t get this in Miami”. Precisely. And the natural beauty, of course, only starts in Vienna.

Waydamminit!

Good bye! By 11am on November 11, 1918 the number of deaths had shot up from 2 to around 16,000,000.

While I sat last Tuesday in my hotel room thoroughly enjoying England’s richly undeserved win against the soccer representatives of the Thugdom of Ukraine (from which my grandparents fled a century ago), my mind wandered elsewhere.  While Ukraine is receiving much coverage for proudly co-hosting Euro 2012, didn’t Austria, in living memory, proudly co-host a slightly bigger competition- namely the Second World War? And for that matter, might the Austrians be responsible for that little contretemps attracting the title “Second World War”, since arguably if it wasn’t for them there wouldn’t have been a first one. And wasn’t it their president, the upright one-time Secretary General of the United Nations who was discovered to be a little too enthusiastic member of the Wehrmacht? And not one word of remorse from him or the country.  Even in the field of international taxation, in their own quiet way they have historically had one of the most brutally favourable holding company tax regimes in the developed world, grabbing what they could from the competition.

Greek workers taking a clandestine 5 hour lunch break

In short, Austria suffers from cultural schizophrenia. And maybe – just maybe – that is PRECISELY what Europe needs just now. And that is why the choice of Austria to stage the conference this year was so appropriate. Perhaps the other  members of the European Union – ignoring  Britain which surely won’t be there ten years  from now-  need to accept publicly the credo of German economic ethics while maintaining their own differing cultures at home.  They could take their cue from the Marrano Jews of Spain who chose conversion to Christianity over the auto-de-fe during the Spanish Inquisition but maintained their Jewish traditions at home in secret (although a cautionary word – that option did not work for the Jews in the 1940s). Alert readers will have spotted that this idea essentially represents Virtual Occupation. Given the history of the Continent, if the European project is not saved, Virtual Occupation may well be preferable to the alternative.

Next year’s conference is in Berlin.

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