Is the Greek fiscal adjustment program actually fuelling tax evasion?

The IMF’s Poul Thomsen said that Greece would fail to meet its targets if more was not done to tackle tax evasion. He said the fiscal adjustment program would not succeed unless “Greek authorities make quicker and more decisive structural reforms to address tax evasion.”

Mr. Thomsen is in charge of the Greek “program” for two years now. His numerous rounds of negotiations with the Greek government have resulted in the following

- Unbearable and debilitating taxes that are independent of income e.g. taxes on property and consumption (VAT, fuel, tobacco, alcohol etc)

- The loss of more than 500.000 jobs in the private sector raising the number of unemployed to more than 1.000.000 or 22% of the workforce. This will certainly result in another “lost generation” similar to the UK in the ‘70s.

- A sharp decline in property values as well as invested capital.

- A monumental credit crunch that has sucked all the liquidity out of the economy.

- Haphazard and ineffective “reforms” that have not addressed the main issues of a gargantuan state, corruption, a failed judiciary and an economy asphyxiated by over-regulation

What the fiscal adjustment program has done is actually to rob those Greeks who did pay taxes in the past of their savings and in many cases of their livelihood. New taxes piling upon previous taxes that have lost their effectiveness as the economy is crashing, are mainly being paid by taxpayers dipping into their savings, thereby further demonetizing the economy.

Mr. Thomsen has agreed to across-the-board cuts to pensions instead of focusing on ridiculously high government and public sector pensions that are placing an unjust burden on the taxpayer. He also agreed to horizontal wage cuts instead of a sweeping restructuring of the public sector and the elimination of hundreds of thousands of totally useless “jobs” in the public sector.

He failed to negotiate and push through real reforms many of which were actually part of his different “memorandums”. It is eminently hypocritical of him to try to pin this on “structural reforms needed to address tax evasion” as he has been part of the group that has shaped the impossible tax burden Greeks are facing today. How can you tackle tax evasion if the tax system is impossible to comply with, collected taxes pay hundreds of thousands of useless public servants and DEKO employees, those who collect taxes are mostly corrupt and the judicial system is impossibly slow and ineffective;

By failing to push through reforms and by piling tax upon tax on the Greeks, Mr. Thomsen has actually been instrumental in fueling tax evasion and has so far crushed those Greeks who did pay taxes in the past. So he’d better shut his foul (or should I say “poul”) mouth.