Greek Tax Hikes Backfire As Tax Revenues Plunge 16%

Tyler Durden's picture

There was some hope that Greece, which for the past few months was desperately trying to show it has a primary surplus when in fact it was merely shoving unpaid bills under the rug, was at least getting its runaway deficit situation under control. This, despite what many sensible people pointed out was the return of nearly daily strikes, which meant zero government revenue as zero taxes could be levied on zero wages. Turns out the sensible people were again right, and the Greek and European propaganda machine has failed once more as the Greek Finance Ministry just reported that despite big tax hikes demanded as part of austerity measures by international lenders, tax revenues fell precipitously in January, with the Greek Finance Ministry reporting a 16 percent decrease from a year earlier, and a loss of 775 million euros, or $1.05 billion in one month.

This means that the government took in only €4.05 billion ($5.47 billion) in tax revenues in January, far short of its target of €4.36 billion ($5.89 billion), a $420 million shortfall in one month, which also came during an annual holiday sales period for shops who are bleeding customers and shutting down by the thousands.

It is all downhill from here as the feedback loop of more spending cuts is activated to offset declining revenues, leading to even less revenue, and culminating with the complete collapse of Greek society.

From Greek Reporter:

If Greece fails to meet revenue targets it will trigger a correction clause at the end of each quarter of the year, setting off automatic spending cuts except for pensions and salaries. That could further harm already-depleted government services.


Finance Ministry officials attributed the decline in tax revenues to the drop in consumption, as revenues from Value Added Tax (VAT) shrank by 15 percent, while those from the special consumption taxes were also lower. Greeks hammered by big pay cuts, tax hikes and slashed pensions have cut back spending even on essential items, with supermarket sales falling 500 million euros, ($6763 million) in 2012.


The numbers could have been worse as the government gained revenues from doubled property taxes and big hikes in income taxes that have hit most Greeks except for tax cheats who continue to largely escape sacrifice or prosecution.

This may well be the last straw for a "fixed" Greek crisis - "the only options left for the government is to collect from tax evaders and improve tax collections, although tax hikes have led to many more Greeks trying to hide their income, statistics showed." Of course, nobody could have predicted that too.

The Troika and other EU countries offered to help Greece collect taxes but little interest has been shown by the government. The new General Secretary for State Revenues, Haris Theoharis, plans to meet directors of the 36 biggest tax offices in the country to study ways of collecting expired debts, according to proposals by the country’s creditors and the European Commission’s Task Force for Greece.

Does this mean that paying hedge funds at 50 cents on the dollar on their worthless Greek bonds was not the best idea?

But, but the spin was that if only all Greek debt was converted into zero coupon perpetuals all would be well?

Or maybe they were just referring to Deutsche Bank. As for the Greek population, where everyone is simply doing what they can to survive, which certainly does not mean paying taxes to the government, it is every man, woman and child for themselves.

Finally, one can only hope that the US will learn something from what this terminal collapse of a socialist utopia looks like. Sadly, it won't.

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MiltonFriedmansNightmare's picture

Greek "authorities" are pretty much on par with the BLS in my book...we're all Greek now.

Bicycle Repairman's picture

This episode points out the value of a democracy with voluntary cooperation.  If the sheeple believe in the system, they'll pay up with little effort by the government.  How effective would tax collection be if armed, foreign officials were introduced into the environment?

You can talk about the army going around seizing assets and human rights, but that is simply killing the golden goose.

Time to face the basic fact that any loanshark knows: you can't "juice" a "mark", if you kill him.

flapdoodle's picture

Zero taxes on zero wages?

Why that is just silly. Of course they have lower tax revenues!

The solution is at once simple and elegant - it will become the Patriotic duty of all Greeks (and their legal obligation with new laws) that Greeks must pay taxes every year in the sum equal to the highest tax they paid in the previous ten years, whether or not they are employed.

This will work as a wonderful motivation for lazy Greeks to go out and look for a job, and at the same time works very well for Greek Bankers and Politicians who through careful effort, skill and sacrifice avoided paying any taxes in the previous ten years!

Solves many problems at once!

Montezuma's picture

Austerity works right? Even if you hate Krugman you guys need to give him this (which you wont, too busy trying to find Greece from the map while shining your new patch of hollow-points).


Lets face it, Greece had no place in eurozone, its a backwards country reliant of tourism and they never have paid their debts. Usually when beer turns to wine (or uzo) things get more and more fucked up. 

But what has EU learned about the whole debacle? Own currency is needed for countries that cant compete? EU doesnt work? Austerity in recession doesnt work (Ireland, Spain, UK, Greece etc...)?

Well I according to my buddy who have the "pleasure" of working in this unholy bureaucracy tells me that the MEPs think there is too little EU and it needs it own taxes...

Bastiat's picture

Read an article in the SF Chronical last week that quoted a wealthy man of about 70 in a follow-up to something done during the election where they raised CA  income tax.  He said yes, he had done exactly what he said he was going to do:  close his private equity firm, reduce his income and travel.  For him 50% combined income tax was the tipping point.  The loss of course is not just the tax from his income but the new jobs his firm was venture funding.  Many others will simply leave the state.  Hell if you like CA, establish your residence elsewhere and have extended visits.

HeatMiser's picture

17 Corparations are leaving Calitaxication everyday.

Meat Hammer's picture

Campell's Soup was a staple of the Sacramento economy for decades.  It recently closed down.  When the local news guy asked one of the state legislators why he thought the soup company shut down, his reason was that people don't really eat canned soup anymore.  

DR's picture

He is a poor business man to have his PE firm listed in California-next door Nevada would have been a better choice for incorporation.

Temporalist's picture

What's all this then?

Russian fighter jets 'breach Japan airspace'

Two Russian fighter jets have violated Japanese airspace, prompting Tokyo to scramble its own aircraft, reports say.

mess nonster's picture

It's this:

Don't own a small island country with no energy resources, an aging population, an export driven economy, 300% percent debt to GDP, too many dollars, and no room to inflate.

If you own that sort of country, you'll be everyone's bitch.

devo's picture

From Plato to...this.

Harbanger's picture

Plato has been said to be the first of the planners and founders of Socialism.

devo's picture

No accident, comrade.

Going for the "I sound disgusted"/"what do you expect from a central planner" all in four words.

#Epic fail

centerline's picture

The politicians haven't a clue what they are doing here.  They are just egomaniacs.  Wannabe elites.

The ones really in charge of what is going on are not stupid.  This is all on purpose.  A middle class beat down of epic proportions.  And YES, it will come here.  Everyone will be shaking their heads wondering why we repeat the same mistakes over and over.  The reason, quite simply, is that they are NOT mistakes.  They are part of a bigger program being played out.  It is that damn simple.  There is no other plausible explanation.

Everybodys All American's picture

When will the political opposition to Obama take a stand? The door is wide f'ing open.

centerline's picture

I don't see any real opposition.  Only controlled opposition and lots of useful idiots.  It all looks like a well choreographed dance to me.

Everybodys All American's picture

The majority of these guys have no new ideas and are void of a game plan to oppose Obama. No one seems to having the guiding principals of fiscal conservatives needed and/or are afraid to step into the limelight and take on the slave master.

centerline's picture

Is scary.  The lack of all of this is really tell tale.  Just like the lack of prosectution of those who perpetrated financial crimes.  It's a free-for-all now.  Shit is accelerating and every effort is being made to cleverly obscure and delay the impact.  My fear is that in doing so, it will all hit at once without any appreciable warning.  Just "WHAM" and the lights go out... proverbially (and maybe for real).

Taffy Lewis's picture

Everybodys All, it's over in the U.S.

No politician will dare to go up against any supporter of the FSB (Free Shit Brigade).

You are making a strategic mistake if you think there will be a turnaround.

orangegeek's picture

I don't have Barry's email address.  Could someone forward this article to him?

dmger14's picture

As it should be, right?  Ideally, the malinvestment and socialism get purged at the same time.  I wouldn't hold my breath on the latter.  Idiocy is permanent!

hairball48's picture

I'm still long Greek donkey carts...maybe I'll  go long on the donkeys too.

Notarocketscientist's picture

Maybe Greek tax revs will go to zero soon.... and the EU can just give each citizen a stipend for life

epwpixieq-1's picture

Let made some analysis on the tax revenue from consumption. One thing that some people do not realize reading though all this info, is that the Greek people have alternative(s). They can slow their consumption, produce most of whatever they need on their own, or as most of northern Greeks do, go on shopping in the southern parts of their EU, comparatively, inconceivably less leveraged, neighbor Bulgaria. This is what happens when you have an over-leveraged ( over debt-ed ) system, where the people have REAL choices to paying more taxes on the consumption, whatever they may be. In this case slowing their consumption or directing their consumption to the neighboring a lot less taxed state.

mess nonster's picture

Or, you just buy stuff under the table for cash or barter. That's what VAT does best- create a black market.

If black market prices must be higher in nomlnal terms (ie, compared to base prices in legitimate markets, minus VAT), they must also be cheaper than prices including VAT, or the black market can't exist.

If one adds in the advantage of a black market in that cash transactions are also untaxable re. incomes derived, then black markets benefit everyone. The buyer gets goods priced at least somewhat cheaper than price+VAT in the stores, and the seller, since she doesn't have to pay income tax on her gains, can sell at only a slight markup over the legitiamte base price.

Losers- government and banks.

Solution: Outlaw cash, solution coming soon, after gun confiscation and national biometric ID.

Obama4Ever's picture

"... and culminating in the complete collapse of Greek society."

Right, I get it. We must tie collapse of government (due to inability to finance its operations) to collapse of society. It's all perfectly clear now: society cannot exist without government.

Thanks for the tip.


shovelhead's picture

When over half of the people eat from the Govt. handouts, I'd say THAT society cannot exist without Govt.

Which pretty much means all of them except for countries who Govt.s don't feed anyone in the first place.  Myanmar, Zimbabwe, Somalia and the like.

The New Normal.

Obama4Ever's picture

In some science class we had this dish with bacteria in it. For a few days we kept putting some sugar solution in it. The bacteria kept growing and expanding. Finally we got tired of feeding it. All the bacteria died.

I'm still around though.

Aside: Personally I'd willingly let all the sponges whose life depends on government gifts to die, if that means I get to live free!