February 2, 2010 / 3:31 PM / in 8 years

Crisis-hit Greeks scramble for tax receipts

ATHENS (Reuters) - Cafes, shops and taxis around Athens are handing out receipts by the thousands to customers frantically stuffing their pockets with proof of payment for anything from a glass of ouzo to a family Sunday lunch.

Business has not suddenly turned good in recession-hit Greece, but people are clamoring for receipts after the government announced in December they would be required to claim a standard income tax-free allowance that was previously granted automatically.

“People demand receipts like never before,” said Yannis Lazos, 40, who runs a clothes shop in central Athens. “I can see it in their eyes, they think: ‘I want my money back, I want to be taxed less’. These are difficult days, it’s the crisis.”

Under pressure from bond markets, rating agencies and the European Union to get its fiscal house in order, the government hopes the receipt collection plan will help it fight endemic tax evasion as it scrambles for resources to plug a huge budget gap.

The aim is to use ordinary citizens to flush out Greece’s tentacular black economy, estimated to amount to at least a third of the official, 250 billion euro ($351 billion) gross domestic product, by making them demand legal proof of payment.

No one knows quite how, or indeed whether, the new system will work since the government has yet to announce details.

Accountants say the idea will merely add another layer of red tape in a country drowning in bureaucracy. But taxpayers are taking no chances and stocking up on receipts, just in case.

Old habits die hard. Waiters routinely use the same receipt for several clients’ ice-cold frappe coffee, and plumbers and electricians offer cheaper rates for cash and rarely give Value Added Tax invoices.

“This is endemic here,” said Yanis Varoufakis, professor of economics at the University of Athens. “The only way to get around that is to get financial incentives for customers to want to pay VAT, to give them something in return.”

THROUGH THE CRACKS

Money falling through the cracks is one of the main reasons why Greece faces its worst debt crisis in decades. The European Commission is expected to tell Athens this week to improve tax collection -- as well as cut public sector wages -- to shore up its finances.

The Socialist government, which came to power last October pledging to tax the rich, help the poor and end the recession, hopes to raise more than 1.2 billion euros ($1.70 billion) in extra revenue this year from fighting tax evasion.

Under the new rules, wage earners and pensioners will need to declare receipts to the taxman to keep benefiting from a personal tax-free allowance, currently set at 12,000 euros.

Yet in a country where the rule of law can be erratic, and people often cite bad public services and the perceived unfairness of the system as an excuse to dodge taxes, many doubt the measure will work.

“If it works, I’ll be glad, but tell me, do they really expect to find the money through our receipts?” said 52 year-old supermarket employee Aristea Mihalopoulou.

Others were even more skeptical.

“This plan is ridiculous, for big problems you need big measures,” said a financial adviser who asked not to be named because of his profession.

Finance Minister George Papaconstantinou said people will not need to take bags full of receipts to the tax office, but rather submit a list detailing expenses and vendors’ tax numbers.

Accountants say people will only comply if offered a tax break big enough to cover the cost of VAT at an average rate of 19 percent plus the cost of the extra paper work.

“As a union, we are against any measure that will increase bureaucracy in an already complicated tax system,” the Greek accountants POFEE federation said.

The much-debated plan even prompted a hoaxer to publish a newspaper ad, pretending to be an unemployed man not paying taxes and offering to sell receipts. The contact phone number turned out to be that of the Finance Ministry.

Opinion polls show most Greeks are willing to pay a price to help the country out of the financial crisis, if austerity measures are perceived as fair. Analysts say that in a country with a history of social unrest, the Socialists must act quickly before the window of opportunity slams shut.

“If the government taps in that mood it has a chance of succeeding. No guarantees. Just a chance,” said Varoufakis.

Writing by Ingrid Melander; Editing by Silvia Aloisi and Paul Taylor

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