Euro exit worry prompts more Greeks not to pay tax

ATHENS Wed May 23, 2012 11:53am EDT

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ATHENS May 23 (Reuters) - Greeks are notoriously reluctant to pay taxes, but even those that do are holding off at the moment until they are sure their country stays in the euro zone.

State coffers are on track for a 10 percent fall in revenues this month as a result, a senior finance ministry official said on Wednesday.

Two tax officials who declined to be named told Reuters that May revenues fell by 15-30 percent in tax offices away from the major cities and relative wealth centres of Athens and Thessaloniki.

"People are suspending some payments because we are in a pre-election period and also because of uncertainty stemming from a potential Greek euro exit," said the finance ministry official, who requested anonymity.

Left rudderless after an inconclusive May 6 election and set for a second poll in June, Greece is in danger of falling out of the euro zone, something for which even euro zone officials are now preparing.

It is likely to run out of money next month without further aid from foreign lenders worried the country is falling ever further behind its financial targets.

The full extent of Greece's tax payment woes will become clear next month after about 250,000 of about 5.5 million tax returns due are completed.

But the likelihood that taxpayers are now holding off will add the struggle to fix Greece's battered budget.

Latest official data showed Greece's state budget revenues over the January-April period rose year-on-year to 16.15 billion euros but fell short of the 16.64 billion euro target, due to lower than expected tax revenues in a contracting economy.

A higher number of companies reporting losses has also hurt tax collection, the official said.

Tax returns of small and medium-sized companies suggested about 60 percent were claiming losses for 2011, up from about 20 percent in 2010, said Abraam Panidis, head of Greece's independent accountants' union.

"People don't have money to pay their taxes because of unemployment and recession," said Panidis. "They are waiting until the last minute to collect the money they owe and then pay up."

The falling tax receipts further complicate Greece's efforts to lower its fiscal deficit to 7.3 percent of gross domestic product this year from 9.3 percent in 2011.

That task was already a difficult one since the country is now in its a fifth year of a recession that has left one out of five Greeks jobless and shut tens of thousands of businesses.

Bailed out twice already, Greece relies on aid from the European Union and International Monetary Fund to keep afloat.

Greece has long struggled with patchy tax collection and efforts to reform a tax administration widely seen as corrupt and ineffective have failed to make significant progress.

Earlier this week, caretaker Finance Minister Giorgos Zanias said his main objective was to combat tax evasion and that he would personally contact all Greek tax office directors to press them to achieve revenue targets.

But the lack of a government has only worsened Greece's already dire finances.

"Right now, there is widespread tax evasion due to the fact that there is no government in place to enforce tax collection as foreseen in the bailout plan," Panidis, the accountant's union chief said.

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