[Editor's Note: This is a reprint of an article written by LG that appeared in the Asbury Park Press on Sunday, November 13, 2011. That version did not contain these photos. Only the best for readers of The LG Report!]
I'm not an economist (who would admit to that these days even if they were?) but as a Greek-American, I have my own layman's explanation of the economic crisis in Greece. It centers on a dearth of tax revenue. But first, my qualifications: My father was born and raised on Andros, the northernmost of Greece's Cycladic Islands. I've been to Greece many times, including recently on my honeymoon. I speak enough of the language to get by, I have plenty of Greek friends and relatives, I saw My Big Fat Greek Wedding, twice, and I love betting on horse races. Oh, and perhaps my most conspicuous Greek badge of honor: I grew up washing dishes in my father's New Jersey diners.
So here's my back-of-the-envelope analysis. No need to break out your calculator to follow along.
Not paying taxes has long been a national pastime among Greece's citizenry. It was not uncommon in the Old Country, years ago, to pay for a purchase in a store without having the transaction rung up on a cash register. Absent a receipt, the government had no way of knowing that a tax should be collected. Many times, I'm sure, it merely slipped the merchant's mind to report the income. After all, he had other things to think about, such as who was looking good in the sixth race that day (most Greeks like to gamble) and what the line was on his favorite soccer team.
In order to address this widespread duplicity in the sales tax system, Greece passed a law requiring consumers to obtain a receipt for their purchases. The government now dispatches tax agents to patrol shopping districts, randomly stopping patrons and demanding that they fork over receipts for any purchases in their bags. Failure to produce a receipt can result in a costly fine. Thus, consumers have become, functionally, the taxing authority's enforcement arm. In theory, this should have mitigated at least part of the problem, but I'm not so sure; what's to prevent merchants from simply having two separate cash registers? As we all know, just about any compliance system can be easily defeated if the human mind is earnestly set to the task.
My Aunt Rita, who lived in the United States for close to 50 years before retiring back to Greece, recently needed some carpentry work done in an apartment she owns in Athens. She found a tradesman who said that he would do the work for 300 Euros. When Aunt Rita mentioned that she wanted a receipt for her taxes, Carpenter Costas informed her that the price would be increased to 347 Euros. If Aunt Rita was going to report the transaction, he was going to have to do the same, hence his 15% price hike — effectively, a penalty on Aunt Rita for following the law. In the normal course of his work, Carpenter Costas just assumed that there would be no reporting to the government and no payment of taxes. Multiply this by the number of transactions that arise among a populace of about ten million people, and Greece's lack of tax revenues comes into sharp focus.
While many Greek citizens (although certainly not all) appear to believe in their right to avoid paying taxes, they also seem to overlook the logical disconnect with their sense of entitlement to extensive government employment opportunities, full pensions and a litany of other state-provided benefits. Apparently, these perks should be funded by the taxes of the other guy. Running from the tax collector may have well been the first Olympic sport.
When I first started going to Greece in the 1980s, I was struck by the apparent religious devotion of the Greek people. Everywhere I looked, especially on the islands, I'd see little white chapels standing as monuments to the populace's piety. In many instances, a small house of worship, not capable of accommodating more than six or eight congregants, would stand alone near the top of a steep mountainside, without so much as a single access road in sight. I'd just shake my head and say to myself, "Wow, what devotion!"
Then, on perhaps my fourth or fifth visit to Greece, I said to my Uncle Leo (Aunt Rita's husband), "It's really impressive how devoted to God the people are here. They build churches almost everywhere."
A savvy businessman who had run a thriving construction company in America, Uncle Leo quickly set me straight. "Hey, Vlaka [which translates to "stupid" in English], don't you know why they do that? Everyone builds a church on their property here so they can get a tax break."
Aha! An epiphany, although not of the religious variety. More tax avoidance. Perhaps now those ornamental tax deductions on the mountainsides are finally filling up ̶ with Greeks praying for a way out of their dire economic situation.