No one likes paying taxes, but Greeks seem to have an especially strong aversion to handing over their money to the state. Dimitris Georgakopoulos, the man in charge of taxation at the Ministry of Finance, says the attitude dates back to the 400-year-long Ottoman rule over Greece, when people evaded taxes as a form of resistance. Ordinary Greeks point to a more immediate cause. "Everyone cheats," says lawyer Elena Tzanetakou, 29, as she rushes out of a tax office in Athens after filing paperwork for a client. "The system is corrupt and it always has been, so people think, 'Why should we pay?'"
In recent decades, every Greek government has entered office vowing to clean house and crack down on the twin scourges of tax evasion and corruption. But during the years of plenty there was little external pressure for the country to mend its ways. Now, with Greece's public debt ballooning out of control and Greece accused of putting the integrity of the euro at risk, the stakes are higher. Greece must cut spending and raise more revenue or risk defaulting on its debt.
Greek Prime Minister George Papandreou has put tax reform at the heart of his austerity plan, and says his government is serious about fixing the roots of his country's current economic predicament. He says Greece will tackle its deficit without the deep government-wage or job cuts that other heavily indebted European countries, like Ireland, Spain and Portugal, have recently announced. Instead, Athens will pursue tax evaders. "Greece's problems," Papandreou told journalists at a press conference marking his first 100 days in office, "are due to waste, corruption and lack of respect towards the law."
But there's good reason to doubt Greece will find any quick fix for its tax problems. Like other southern European nations, the country's culture of tax evasion is deeply rooted, woven into the very fabric of relations between the citizen and state. "Greeks love their country, but they don't trust it," says a small businessman who asked to be called Dimitris, saying he feared repercussion from the authorities if he gave his real name. "They tell us the state is broken. There is no money for health, for pensions, for education. On the other hand, we see people building big houses with swimming pools."
Dimitris, who owns a small retail operation, admits he cheats on his taxes. He says he only submits tax invoices for roughly half of what he sells — about $17,000 of the $34,000 he takes in every year — and pockets the 19% sales tax he collects on the rest. When he files his income tax return, he declares only the revenue for which he has issued receipts. The system works because further up the chain his suppliers only declare half of what they sell him, and further up still, someone brings many of the goods into the country without paying the full customs duties. So far, Dimitris says, his store hasn't been audited. But when the tax authorities come to look at his books, he knows how the conversation will go. He'll invite them in and offer them a whiskey or a coffee and wait until the mood is right. He's done it before. "I say, 'Now we are friends,'" he explains. "As a friend, are you going to put me in jail?"
In his previous life as a nightclub owner, Dimitris went through this routine frequently. He estimates he paid about a fifth of his revenue in bribes — to tax collectors, health inspectors, police and other officials. Small firms "are essentially obligated to conduct business this way," he says. "There are so many legal barriers to conducting businesses that they'll shut you down otherwise."
While Dimitris insisted his identity be hidden, there is little chance he'd be caught or seriously sanctioned for his crimes. In 2007, the last year for which statistics are available, Greek authorities prosecuted only 10 people for tax-related crimes that carried a potential jail sentence.
Calculating the full cost of tax evasion in Greece is nearly impossible. The Greek government estimates the shadow, or untaxed economy, is about 30% of the declared economy, among the largest black markets in the 16-member euro zone.