Greek Default Watch :: New Property Tax Unfair

Greek Default Watch. The Greek Government announced on September 11, 2011 that to plug the country's 2011 budget deficit shortfall, it is going to find a more equitable non-descriminatory way to tap the nation's private finances. A Special Property Tax is to cover separately the tax years 2011 and 2012. The Greek Government admits that it can't trust the tax collection system, so they are using a more sneaky and more efficient approach - the billing system of the national electricity company, known as DEH. Sneaky means that there is an obvious link between the possibility of having the electricity service cut if the special tax on a DEH bill goes unpaid. The 2011 levy has to be paid before February 2012. Ouch! For 2012, it is proposed to be spread installments throughout the tax year.

The special "property tax" levy is to be set between .5 to 10 euros per square metre calculated on a property's covered building area, and depending on the location of each property. The information on a building's size is already in the DEH database.

What makes this special "property tax" so galling for the average Greek is a simple fact that fellow blogger, Nikos Tsafos so succinctly writes about. In Fact #4 of his rundown of Ten Surprising Facts about the Greek economy, he states that for the tax officials to collect 40% of tax arrears would eliminate the 2011 budget deficit. In June 2011, the Ministry of Finance reported that tax arrears amounted to €41 bn. Of that number, 90% came from 6,500 people and from 8,200 corporations that owe over €150,000 each. Collecting those arrears would more than cover the projected 2011 budget deficit of less than €17 bn. The link to Nikos Tsafos' article at page bottom.

Everyone who owns a home or business in Greece knows that DEH, the state electricity utility has for many years collected and continues to collect municipal (council) taxes and EPT, the state broadcaster's TV license with each billing. Both fees are calculated on a quarterly, pay-as-you-go basis and billed accordingly.

Having announced the special property tax (it has happened before, as an emergency fund raising exercise on larger properties), it is no wonder the ordinary Greeks (and of course foreigners who own a holiday home or full time residence in the country) are reacting badly.

Ancient Greece developed democratic values in the "City States" concept. Modern Greece is going down the wrong path of governance and taxing the wrong segments of society to plug deficits.

I contend that the Greek authorities need to take two immediate actions to forestall any further, what I term catastrophic and damaging events on Greek society. The state prosecutors need to: 1. start going after the "elite", those who owe huge back taxes, and 2. To start criminal proceedings against the corrupt in high places over the awarding of government contracts.

I am sensing, the ordinary Greeks all over the country have simply had enough of being squeezed financially and are going to react badly this winter when inflation gets even worse and income is reduced further. Is a "Greek Spring" in the making? (A sidebar fact - Tobruk, Libya, part of the "Arab Spring" is about the same distance due south of Crete as the Greek capital is due north).

In a cause and effect scenario, the next thing we will wake up to one morning is to find that a military coup (the impossible turns into the possible) having taken place to preserve the integrity of the nation. Just like a few weeks ago no one dared to speak of a Greek euro default but now it is on the cards. Watch how things develop and pan out in the coming weeks.

View Nikos Tsafos Blog. Very precise analysis of the real Greek situation.