Let's put things back into perspective. Europe is lending money to Greece, which according to latest rumors will at least for the time being be in the form of the dreaded Escrow Account, which in turn means that the only recipients of bailout cash will be Greek creditors, whose claims will be senior to that of the government. In other words, it will be up to Greece, and specifically its own tax "collectors" to provide the actual funding needed to run the country as bailout or not bailout, Greek mandatory (forget discretionary) expenditures will not see one penny from Europe. As a reminder, the country is already €1 billion behind schedule in revenue collections which are down 7% Y/Y compared to an expectation of 9% rise. As a further reminder, the one defining characteristic of Greek tax collectors is that they are prone to striking. Virtually all the time. And that is assuming they even have the ink to print the required tax forms. Which last year they did not. So under what realistic assumptions are Greek tax collectors laboring in the current tax year? Why, nothing short of them having to be not 100%, but 200% more efficient. From Kathimerini: "Greece’s tax collectors were told over the weekend that they would have to do a much better job this year at gathering overdue taxes. How much better? Almost 200 percent." And this, unfortunately, is where the Greek bailout comes to a screeching halt, because while it is no secret that Greek "bailouts" do nothing for the country, but merely enforce ever more stringent austerity to mask the fact that all the cash is simply going from one banker pocket to another, it is the pandemic corruption embedded in generations of behavior that is at the root of all Greek evil. And there is no eradicating that. Now tomorrow, and not by 2020.
From the Greek daily:
According to Skai TV, some 700 million euros was collected in 2011 by chasing down taxpayers that had run up debts. This year, inspectors will have to collect 2 billion euros as Greece tries to meet even tougher fiscal targets amid a deepening recession.
Preliminary figures showed that tax revenues were already 1 billion euros short of the government’s target in January alone, with VAT receipts showing a considerable drop. As consumption decreases, so do revenues, which makes it even more vital that any existing debts are settled.
However, to do that, Greece needs the appropriate personnel and know-how. Although progress is being made both in terms of the information technology being used by the tax service and the assessment of staff, there is still considerable ground to be covered.
It’s more than just a question of installing new software and retraining staff. It’s an issue of shedding the mentality and practices of the past and replacing them with something new. This is something more complicated and time-consuming.
Presenting- the weakest Greek link.
The backwardness of Greece’s public administration, it’s ability to trip itself up either by mistake or on purpose, is one of the factors that the Europeans and the International Monetary Fund grossly underestimated over the last couple of years.
This self-destructive tendency was in evidence on Saturday when tax collectors belonging to one union protested outside Greece’s National School of Public Administration as exams took place inside with the aim of assembling a crack squad of 1,000 tax inspectors that would tackle tax arrears and evasion more effectively. The protestors felt that members of the other tax collectors’ union were being favored. Cynics might say that a tax collection A-team wouldn’t suit some of their colleagues who have a nice sideline in pocketing bribes in return for turning a blind eye. Upsetting this clandestine business would hit their incomes hard.
Either way, the outcome of the protest, which prompted the intervention of the police, was that only a few dozen inspectors took the test. When compared with the news from Italy over the weekend that more than 70 tax inspectors were sent to Courmayeur ski resort to check if receipts are being issued, one can see what a huge distance Greece has to cover.
If you want to fix something fatally broken, you need a grand reset first. It goes for modern Keynesian economics just as it goes for Greek tax collection methods. Alas, it won't happen anywhere, instead the system will trundle along until everything just finally breaks.
Some would suggest that the only way forward is for the whole department to be stripped down and rebuilt. If the short-term hole in revenues that this would create weren’t a problem, perhaps it would be worth contemplating. But there’s another reason that this approach isn’t feasible. As part of the new loan agreement, Greece has committed to letting 150,000 civil servants go by 2015. It has also promised to only hire 1 public sector employee for every five that leave.
This means that overhauling any department is out of the question because new hires cannot be made in significant numbers. Any change has to be a gradual process of evolution. With its lenders bearing on Greece, this unsatisfying compromise is hardly going to be enough to produce the results everyone wants.
Why quite the contrary - the "results everyone wants" at this point is for the Greeks to continue rioting now and then, in the process looting and destroying their own country, even as the now terminally insolvent Eurozone proceeds to incorporate Escrow accounts at all peripheral countries which subordinate national interests to creditor claims. As such, the longer Greece does nothing to fix itself, the better for all the financial interests involved as its entire asset base is bled dry and there is nothing left.
As for Greece: if its 11 million people have taken it all in stride so far it is quite obvious that the slave mentality has now penetrated so deep, there is no possible way it will change ever. Unfortunately, Iceland is and will continue to be for a long time the only example where a nation's people dare to overthrow their debt overlords, take on banker interests head on, and win.