P2JW057000-2-A00800-10DFFB7178F CMYK Composite CL,DL,DM,EE,EU,FL,HO,KC,MW,NC,NE,NY,PN,RM,SA,SC,SW,TU,WE BG,BM,BP,CC,CH,CK,CP,CT,DN,DR,FW,HL,HW,KS,LA,LG,LK,MI,ML,NM,PA,PV,TD,TS,UT,WO A8 | Thursday, February 26, 2015 * * THE WALL STREET JOURNAL. WORLD NEWS Greek Scorn for Taxes Slows Reform Syriza Backs Deal Government’s pledge to crack down on chronic tax evasion confronts a deep cultural resistance But Balks at Key Part BY ALKMAN GRANITSAS ATHENS—Of all the challenges Greece has faced in recent years, prodding its citizens to pay their taxes has been one of the most difficult. At the end of 2014, Greeks owed their government about €76 billion ($86 billion) in unpaid taxes accrued over decades, though mostly since 2009. The government says most of that has been lost to insolvency and only €9 billion can be recovered. Billions more in taxes are owed on never-reported revenue from Greece’s vast underground economy, which was estimated before the crisis to equal more than a quarter of the country’s gross domestic product. The International Monetary Fund and Greece’s other creditors have argued for years that the country’s debt crisis could be largely resolved if the government just cracked down on tax evasion. Tax debts in Greece equal about 90% of annual tax revenue, the highest shortfall among industrialized nations, according to the Organization for Economic Cooperation and Development. Greece’s new government, scrambling to secure more short-term funding, agreed on Tuesday to make tax collection a top priority on a long list of measures. Yet previous governments have made similar promises, only to fall short. Tax rates in Greece are broadly in line with those elsewhere in Europe. But Greeks have a widespread aversion to paying what they owe the state, an attitude often blamed on cultural and historical forces. During the country’s centurieslong occupation by the Ottomans, avoiding taxes was a sign of patriotism. Today, that distrust is focused on the government, which many Greeks see as corrupt and unreliable. “Greeks consider taxes as Associated Press BY MATTHEW KARNITSCHNIG AND NEKTARIA STAMOULI A sign for a state tax office, center, adorned with a Greek flag, is seen on Monday in a narrow, deserted street in the country’s capital, Athens. theft,” said Aristides Hatzis, an associate professor of law and economics at the University of Athens. “Normally taxes are considered the price you have to pay for a just state, but this is not accepted by the Greek mentality.” Some also see grounds for cynicism in the case that opened Wednesday in Athens against former Finance Minister George Papaconstantinou. The 53-year-old faces charges that during his 2009-11 tenure, he illegally removed the names of three relatives from a list of suspected tax evaders. Mr. Papaconstantinou denied the charges, for which he faces a life sentence if convicted. Alleged corruption among politicians only strengthens Greeks’ conviction that evading taxes in their own lives isn’t a serious crime, and little stigma is attached to getting caught. A 32-year-old chef in Athens says his income taxes are automatically deducted from his paychecks. But every time he buys something and is given an option to pay less if he doesn’t ask for a receipt, he says yes. Arrears Greece lets almost as much tax revenue slip through as it secures Percentage of tax collected 100% Germany U.S. Spain 75 Greece 50 25 2008 ’09 ’10 ’11 Note: Greece data for 2011 not available Source: OECD THE WALL STREET JOURNAL. “It is a win-win situation,” he said. “I pay less for the products and the store pays less in taxes.” Greeks’ innate resistance to taxation is one reason Syriza, the leftist party now in power, campaigned against tax increases championed by the previous government. The party went so far as to embrace a grass-roots antitax movement called “I won’t pay.” The country’s previous government introduced a new property tax, for example, that led to a sevenfold increase from 2009 levels in collection last year, to €3.5 billion. But Syriza and other critics assailed the tax as unfair and many Greeks stopped paying it late last year, partly in anticipation that the new government would change it. The government’s tax-revenue shortfall in January alone was 23% below its €4.5 billion target for the month. Last week, the government outlined plans to forgive up to 50% of individuals’ tax arrears, a sign it would make good on its campaign rhetoric. Syriza would risk a popular uprising by the very people who put it into power if it were to back away from those policies and get tough on taxes, political analysts warn. The reason isn’t just political, but economic. The country’s depression has already pushed many small businesses to the brink of collapse. Forcing them to pay more in taxes would put even more out of business—and more Greeks out of work. “The Greek economy would collapse if the government were to force these people to pay taxes,” one senior government official said. Though Greece’s rich have often been singled out for not paying their due, the majority of tax evasion occurs at the lower end of the income scale, among small and medium-size enterprises, government officials say. “Most small companies know they will never be audited so they don’t bother to pay taxes,” said a European official sent to help Athens overhaul its tax system. Many companies report they pay their workers the minimum wage, then supplement it under the table to avoid having to pay higher payroll taxes. A 28-year-old saleswoman says her company gives employees special coupons they can cash in supermarkets, restaurants and for other services. “It works much better for us because the money isn’t taxed,” she said. ATHENS—Prime Minister Alexis Tsipras got the grudging backing of his party’s lawmakers for a new deal with Greece’s creditors Wednesday amid signals of continued defiance to the sale of state assets—one of the creditors’ main demands. The agreement reached with eurozone partners and the International Monetary Fund late last week has forced Greece’s government—in power just over a month—to make deep concessions on many promises it made to voters. Pledges to write off the country’s debt, raise the minimum wage, and rehire laid-off public servants have either gone by the wayside or been dramatically pushed back. That has fueled discontent within the left-wing Syriza party, which had vowed to abolish the austerity measures tied to Greece’s €240 billion ($272 billion) bailout and bring sweeping change to a political system many see as riddled with corruption and cronyism. In a closed meeting that lasted almost 12 hours, Mr. Tsipras told lawmakers the new financing was a short-term agreement giving the government time to work out a new agenda. Party officials said the deal was finally approved in an unofficial party vote, despite unease among many lawmakers. Amid signs of internal dissent, Greece’s government has been purposefully vague about privatization. While many in the government say selling state assets could bring needed investment to the country, the left-wing bloc inside Syriza is vocally opposed. Greek Energy Minister Panagiotis Lafazanis, widely seen as a spokesman for that faction, told a newspaper that plans to sell the national electricity company, the state natural-gas company, and an oil refinery in which the state holds a roughly one-third stake wouldn’t go ahead. Free tickets to a screening of the Royal Shakespeare Company’s Love’s Labour’s Lost Where: Multiple Locations When: March 3, 2015 - March 30, 2015 Exclusive to subscribers. © 2015 Dow Jones & Co., Inc. All rights reserved. 6DJ164 WSJplus.com/loveslabourslost P2JW057000-2-A00800-10DFFB7178F Reserve Now Composite MAGENTA BLACK CYAN YELLOW