Thursday 27 May 2010

Latest Developments in the Phantom Tax Residency Certificate

Earlier this morning I received a telephone call from the Ministry of Finance in response to an email I sent on Tuesday.

After explaining the situation, I was put in touch with the director of the International Economic Relations. She started out by asking me how it was possible that my company, which is named “Navigator Consulting Group Ltd.” and is registered in Greece, can have the same name as another company named Navigator Consulting Group”, which is registered in Long Island, New York.

I spent 3 minutes explaining to her the fact that every country has its own corporate registry, and that for my company to register a corporate brand name in 260 countries and territories in the world was prohibitively expensive. She asked me, in an indignant tone “Does this mean that if someone else registers the name “OTE” in America they are allowed to?” I responded that yes, they were, insofar as OTE Greece had not registered its name first, that there were no other “OTEs” registered, and that this name did not conflict with the established laws of the United States.

I was then informed that because this was so suspicious, she had to request a clarification from the US Internal Revenue Service to confirm that there were no links between Navigator Consulting Group USA and Navigator Consulting Group Greece.

I asked how long this would take. She could not answer me.

I pointed out that I had, at her request, faxed her our Articles of Association (Καταστατικό), which clearly shows who the owners of Navigator Consulting Group Greece are, and that in fact our legal Greek name is Συμβουλευτικός Όμιλος Ναβιγκειτορ ΕΠΕ. This apparently did not count.

I asked her why this process had to be followed, if last year (2009 financial year), the Ministry of Finance already gave me a Tax Residency Certificate in a much shorter time frame, for my same company. There was no answer to this question.

I finally asked her why this process should be followed, since I was already declaring the income in Greece from my international contracts. The application form of the Ministry asks for the amount, the client paying the amount, etc. In addition, I included formal copies of our signed contracts. There was no answer to this question either.

My objective conclusions are that

a. The people working in the International Economic Relations Department have little understanding of basic aspects of international business, such as the registration of corporate names, trademarks or brands;

b. The contradictions inherent in the administrative process are so many that there is absolutely no logic or value to it.

This process serves neither the objective requirements of the Greek state, nor my requirements as a business person. As a result, I am closing the company here as fast as I can, and transferring our work to London.

There is absolutely no hope in this country, no hope at all.

Monday 24 May 2010

Greece's Million Euro Website and

In response to a question posed in Parliament by LAOS deputy Kyriakos Velopoulos, Filippos Petsalnikos, the President of the Parliament, confirmed the following:

· The development of the website was financed under the Third Community Support Framework “Information Society”, and was approved under the Parliamentary presidency of MP Benaki-Psarouda and completed under the presidency of MP Sioufas.

· The total cost of the website’s development was EUR 1,011,318.89.

· There was an additional cost for “staff training and management” of EUR 48,197.39

The total costs were EUR 1,059,516.27, including VAT, of which 80% was financed by the European Union. You can see the written correspondence at the end of this post.

This latest example of egregious waste received limited coverage from mainstream press, but extensive coverage on the Greek blogosphere.

I have rarely been angrier in my life than when I first read about this in Kathimerini. The costs of the present platform are certainly not more than EUR 10,000 – 15,000 in today’s costs. Even assuming a higher price for a portal set up 4-5 years ago, the costs should not exceed EUR 20,000 – 25,000.

More than anything, this confirms my decision to wind down my company in Greece. I refuse to pay for any more of this.

Letter from LAOS MP Kyriakos Velopoulos

Response from Parliament President Filippos Petsalnikos

Saturday 22 May 2010

The Missing Tax Certificate ... and the end of the affair

Since March 17th, I have been trying to obtain a Certificate of Tax Residency from the Hellenic Ministry of Finance.

This certificate is a government document which confirms the tax residency of my company, Navigator Consulting Group Ltd. in Greece. It’s something we get nearly every year – you can see a copy of our 2009 certificate below. It should be a formality, but in fact is an extremely time-consuming process ridden by bureaucratic inefficiency and gross stupidity that is emblematic of doing business in Greece.

The procedure for obtaining this certificate is the following: We submit a first application to our Regional Tax Office, the DOY Pallinis, requesting a formal certificate that we are registered in the Pallini tax region. With this in hand, we have to go to the Ministry of Finance, to request a second, formal Tax Residency Certificate, which for some reason can only be granted by the Ministry of Finance.

To our vast surprise, the Pallini tax office refused to give the certificate. The reason for this was that we had not yet filed a tax return in Pallini. This is true. Our tax filing deadline was May 15th.

Prior to this, we were registered in the Halandri Tax Authority. We moved our corporate address from Halandri to Geraka (which is part of the Pallini tax region) in October 2009. This involved a legal change in our corporate statutes, authorised by a public notary, and includes publication in the Government Gazette.

I therefore have to ask what the point is of doing an official change of address, which is published in the Government Gazette, at a total cost of nearly EUR 1,000 and over 1 month of processing time if the tax office to which we have moved refuses to recognise us.

This is even more stupid, when you consider that anyone can look up our tax number on the Ministry of Finance’s online TAXIS system, and see that we are registered at the Pallini Tax Office.

So we are legally registered at the Pallini Tax Office. But the Pallini Tax office does not recognise us.

Our accountant had to make 6 different trips between DOY Halandriou and DOY Pallinis, finally brokering a compromise whereby the Halandri tax office wrote a “Departmental Note” (Υπηρεσιακό Σημείωμα), which our accountant took back to the DOY Pallinis, finally getting them to issue the first certificate. This process took over 1.5 months: the certificate was submitted to the Ministry of Finance on May 3rd.

The Ministry of Finance normally needs 10 working days to process this form into a second form, the official Certificate of Residence. As of yesterday, 21 May, the Certificate was not ready.

Why do I need this certificate in the first place? On March 22nd, I started a due diligence and business planning project for a leading CIS company, which required a Tax Residency Certificate to advance a 50% project downpayment. I also need it to invoice the final billings for three other projects.

So, at a time when the Greek government is bankrupt, I am not only importing consulting fees (by export consulting services) from abroad, but I am doing it legally: by declaring the income. Instead of helping me, the Greek tax system is causing an unacceptable delay, and a serious cash flow problem for my firm.

After this experience, I have decided to close our company in Greece, and bill all new work through our new company in London. I can no longer afford to have both my professional reputation as a Greek service provider dragged through the mud by the machinations of an irresponsible government, and then face these unacceptable delays in what should be a simple tax certificate.

I am also no longer willing to pay multiple, absurd fees for the Government Gazette or the tax office or whomever, if the very system does not respect its own rules. And this is not to speak of million Euro websites for the Greek Parliament, or Siemens bribes, or Vatopedi, or German submarines.

The fact is that no one in a position of political responsibility in this country appears to have any idea of the challenges faced by individuals or companies to implement what should be a simple business procedure. While the Prime Minister jets off to meetings of the Socialist International, I am struggling to pay bills, because I can’t obtain a simple tax residency certificate, even though we have abided by all the rules, and are 100% legal.

We have operating our consulting firm in Greece since 1995. In this time, we have been one of the few Greek consultancies working in “real-world” (as opposed to subsidised) investment management and due diligence in international markets, having advised manufacturers and international financial institutions on over 40 projects and EUR 3 billion in invested resources. This era is now coming to an end, as we move our consultancy to a location which actually supports small business.

Perhaps this story will help our elected officials reflect on why Greece scores so badly in international business environment rankings. Like most actual, everyday experience, however, I am sure it will be ignored, in favour of complex political theory and empty rhetoric which has nothing at all to do with reality.

Wednesday 12 May 2010

The EUR 83 mln Greek Submarine Mystery

Skaramangas Banner at the May 5th Demonstrations in Athens

One of the great, unspoken mysteries surrounding corruption scandals in Greece today is that of the EUR 83 million bribe allegedly paid by the Howaldtswerke-Deutsche Werft (HDW) signed an agreement with the Greek government for the construction of 4 submarines at Skaramanga in 2002.

Since April 2010, Kathimerini has been running a series of articles in which it claims that, according to sources at the prosecutor’s office in Munich, the total amount paid by HDW (later purchased by Ferrostaal, a division of ThyssenKrupp) was EUR 83 million for the four submarines.

This investigation has been widely reported in Germany, not least by Der Spiegel and other sources. But no official conclusions or legal actions have been filed yet.

The Greek government has until recently refused to take delivery of the four submarines, since the first one, the Papanikolaou, listed heavily during sea trials. The incoming Prime Minister, George Papandreou, recently reversed this decision, and has agreed not only to pay the EUR 1.8 bln for the previous four submarines, but even to order two more submarines from ThyssenKrupp at a cost of a further EUR 1 bln.

In a further bizarre twist, the Skaramangas shipyards were recently sold by ThyssenKrupp to Abu Dhabi Mar. Kerin Hope of the Financial Times reports, incredibly enough, that

Nikos Papandreou, the prime minister’s brother, was called in to help with the Abu Dhabi deal because of “the urgency of the situation”, according to defence ministry officials.

I’m extremely reassured to know that the Prime Minister can call upon his brother’s services so freely, circumventing the entire Ministries of Defence, Finance and Economics, or even the Ministry of Foreign Affairs, for urgent situations of this type.

I am doubly reassured by the fact that the Greek taxpayer will probably soon be called to return EUR 230 mln in state aid to Skaramanga, if the European Court decides against Greece (as I somehow suspect it will).

For obvious reasons, I can’t state many conclusions here, since there is still no legal evidence of anything improper. But I believe that anyone reading the articles indexed below can draw their own conclusions without my assistance.

The banner photographed by Stratos Safioleas during the Wednesday May 5th demonstrations in Athens express my sentiments fully. Thanks to him for letting me reproduce it.

Submarine cash revealed

Move to settle submarine spat

Προμήθεια 83 εκατ. για την παραγγελία των υποβρυχίων

How German Companies Bribed Their Way to Greek Deals,1518,693973,00.html

Germany's Ferrostaal Suspected of Organizing Bribes for Other Firms,1518,686513,00.html

Σκαραμαγκάς: οι νέοι ιδιοκτήτες, τα υποβρύχια και οι προμήθειες

Οι Αραβες, τα υποβρύχια και η «προίκα» του Σκαραμαγκά

Τα υποβρύχια βουλιάζουν τον Σκαραμαγκά...

Παραπομπή της Ελλάδας στο Ευρωπαϊκό Δικαστήριο για ενισχύσεις προς Σκαραμαγκά

Tuesday 11 May 2010

Live your Delirium in Greece

Delirium (noun): a highly disturbed state of mind characterised by restlessness, illusions and incoherent though and speech. Oxford Compact English Dictionary.

Olga Tremi © Mega TV

I was really impressed, for lack of a better term, by the ability of this country’s elites to delude themselves and, by extension, its citizens. The evening news on private and public channels in Greece yesterday contained much the same interpretation of three events: the European Stabilisation Mechanism; the resulting stock market rally; and the defeat of the CDU in the elections of Nordrhein-Westfaellen.

The Eurozone’s decision to adapt the EUR 750 bln European Stabilisation Mechanism was somehow seen as a vindication of Greek policy. “You see?” TV anchors chortled…”Europe finally understood our position against the speculators.” By taking this decisive action, the Euro gained value and the ability of Eurozone governments to borrow more money was safeguarded. The final validation of this event—if it were ever needed—was the stock market rally on the Athens Stock Exchange (up 9.18%) as well as other major exchanges.

Not a single anchor or commentator paused for a moment to consider what this meant. By taking extreme action in the form of loan guarantees and ECB/IMF intervention, Europe’s governments admitted two critical facts:

• That further, extensive debt funding would be needed by the Eurozone members, and that given the state of public finance, this funding could not be assured in the open markets;

• That for the first time, the Eurozone has set up a totally new mechanism of loan guarantees whereby one country guarantees another country’s debts. This decision was taken in a rushed summit meeting without a single reference either to the European Parliament, or the national parliaments of the Eurozone members.

Think for just a moment what this means. On the one hand, it is a tremendous usurpation of national sovereign rights, which normally should stem from a national democratic vote. Under the guise of the crisis, the Eurozone leaders have pushed through a poorly-thought decision which commits the Eurozone countries to a de facto political integration.

On the other hand, the decision creates yet another sovereign lending instrument at the moment we should all be concerned with reducing public sector debt, not increasing it. As with all instruments of this nature, we know it will be absorbed, for the simple reason that it exists. Given the repeated breach of the Maastricht criteria by nearly all members (and Angela Merkel’s recent electoral results in NRW), can you honestly see any country saying “no”? It's so much simpler to say "yes", since the instrument now exists.

The Greek news also portrayed a major benefit of this decision as the strengthening of the Euro. I have to ask why anyone sees this as a positive decision. For the vast majority of ordinary workers and citizens, the Eurozone is an export- and tourism-driven economy. While a devaluation of the Euro will make oil more expensive (it is denominated in US dollars), it will make our exports and domestic services (such as tourism) cheaper.

Particularly the Greek economy should be happy with a Euro devaluation: it means US, Russian and British tourists and investors would find Greek property and tourism prices that much cheaper, while tourists and investors from the Eurozone would find them unchanged. Yet again: not a single rational analysis of the situation on Greek TV.

Another main event was the results of the NRW election yesterday in Germany. Olga Tremi, who’s fair visage graces this post, could barely conceal the gleam of schadenfreude in her eye as she turned to the report that Angela Merkel’s CDU lost yesterday. The reason stated on both Mega and NET was that this was due to “Merkel’s delayed decision-making on the Greek crisis”.

In fact, nothing could be further from the truth. Yes, some Germans are no doubt angry at her “dithering”. But far more ordinary voters are angry not because she finally voted “yes” to the Greek loan package, but because she did not vote “no”. The Greek media has chosen to ignore the widespread anger among German voters at having to come up with the largest share of loan guarantees—EUR 22 bln—for a profligate, corrupt and politically irresponsible country. Yet somehow, because the CDU was defeated in a single Bundesland, this is somehow a vindication for Greece.

I honestly fail to see how this can be seen as a vindication. Sure, George Papandreou’s strategy from the start has been to internationalise the situation by blaming the “speculators” and calling on Eurozone assistance. But Greece’s debt problems are entirely of its own making. And since the Greek Prime Minister takes every opportunity to state that debt restructuring is not foreseen, this means Greece will pay back 100% of its loans plus interest. The Greek people pay for this, not the CDU or Angela Merkel.

I start work this morning with two parables in mind:

Don’t bite the hand that feeds you
People who live in glass houses should not throw stones

Will someone please call Olga Tremi and let her know?

Monday 10 May 2010

Europe has bought short-term stability at the expense of long-term survival

I started work this morning aiming for productivity, by instead was distracted by yet more outlandish headlines. Yesterday the European Central Bank decided the massive resumption of quantitative easing by agreeing, for the first time, to intervene directly into public and private debt markets in the Eurozone. This is a massive departure for an institution which, until yesterday, was legally barred from purchasing government debt.

In addition to this, the Eurozone states agreed to EUR 500 bln in loan guarantees in a “European Stabilisation Mechanism”, designed to inject liquidity in panic situations. The total price of the package (including associated IMF commitments) is calculated at roughly $ 1 trillion.

It seems that European leaders can move fast when the main economies are threatened: their alacrity to announce yet new spending in the space of about 4 days is a major contrast with their dithering on Greece, which took over 4 months.

And yet, I wonder if this is really the correct way to go. We are developing yet another layer of structural stability which will be dominated by political consideration, while the dual root cause of the problem—burgeoning public debt and unrestricted short-selling—go unaddressed.

In fact, these are not root causes at all, but symptoms. The root cause is a declining economic and demographic situation in most OECD countries which is putting the post-WWII socio-economic model at risk. Pumping more money into Eurozone public administration is a valid policy response, only if there are signs that these administrations are taking meaningful and sustainable measures to change their fundamental economic and social models.

Are they? I’m in “ground zero” of this sovereign debt contagion, and I don’t many realistic solutions being promoted by the Socialist government. Greece still does not have a list of basic priorities or clusters for investment; its national educational policies does not link to its economic policy; it’s doing little to promote productivity and innovation in the economy or the workforce; it’s doing little to seriously reform the public sector to deliver lean, value-adding services.

In fact, the entire European, and to a lesser extent North American debate is being dominated by the past, not the future. Public policy seems to be oriented towards crafting a nation of placid consumers rather than producers or innovators. The link between public investment in innovation, and actual innovation delivered, is abysmal. The Common Market exists in name, but not in practice. Bureaucratic complexity across the EU is astounding: it’s still impossible, for instance, to electronically file a single corporate income tax statement for a company or individual operating in more than one EU country.

On January 19th, I posted my concern about the coming crash of 2010. The main hypothesis was that the end of quantitative easing would occur in the early spring, leading to a major financial contagion hitting the weaker Eurozone economies. Unfortunately, this scenario turned out to be true. Check my conclusions on this post:

Conclusion: we will probably (55-65% probability) see a rapid contagion in sovereign debt markets by March or April 2010 if QE ends and governments are forced to rely on the open market for funding. Public sector debt will crowd out private sector issues, exacerbating the existing liquidity crisis and leading to a renewed “flight” to alternative asset classes (such as gold) or to “safe havens” as the panic spreads. For smaller, exposed markets such as Greece, Ireland or Spain, this contagion will constitute a major barrier to future debt issues. This will lead to the need for the ECB or larger European countries such as Germany to buy or guarantee this debt, changing for good the rules of the game.

This is exactly what has happened.

If you are a follower of Paul Krugman, the answer now is yet more quantitative easing, more financial stimulous and deficit spending, so governments can buy stability at any price. Normally, I would agree with this hypothesis. But given the absolutely dismal record of most European or US administrations in deficit reduction or general economic policy in the past 10-15 years, do we really expect this to happen?

So here are my next conclusions:

In May 2010, the governments of the Eurozone in conjunction with the IMF and the European Central Bank announced a new financial stabilisation package. While this enables short-term financial stability, it risks the long-term equilibrium between public and private spending in the Eurozone and, by extension, North America. It masks the true liabilities in sovereign debt, and removes an important part of the external financial discipline for national expenditure.

The root cause of the problem—that national governments are spending too much, and are relying either on quantitative easing or financial sector borrowing—has not been addressed.

As a result, neither the United States, nor many European countries are taking the meaningful steps to cut public sector expenditure, or at least allocate it to those sectors capable of producing employment and economic value.

The medium-term impacts of this decision will be to:

• Increase inflation as central banks resort to printing more money and expand their balance sheets radically;

• Place the basic credit policies of the ECB and the Fed under question;

• Increase the sense of moral hazard in the financial sector, as both banks and economies (or sovereign debt) became “too big to fail”;

• Increase the trend in public sector expenditure and unfunded liabilities, leading to a vicious cycle of higher taxation and unproductive spending, at a time when demographic changes were leading to an inexorable change in the basic social and economic fabric of most countries;

• Increase the total national debt (public + corporate + household) of most European countries as well as the United States;

• Cause business investment to increasingly be channeled to offshore or lower-tax locations;

• Increase the political power of Germany and, by extension 2-3 other Eurozone countries at the expense of the entire European Union. Rarely has decision-making in Europe been dominated so extensively by Germany, and the previous occasions when this occurred were not happy times.

I believe that with this current decision, the Eurozone has bought time and stability, without a real commitment to fundamental public sector reform. The root causes of the problem are firmly in place, and accelerate as demographics change and Asian economies become more competitive. An alternative solution should be found, before the potential scale of the cost of dealing with these root causes becomes prohibitive.

Thursday 6 May 2010

Why bring business to Greece?

This is an email sent this morning to my project partners, a leading business school, with whom we are organising a 2-day project meeting plus weekend for 10 people in early June in Athens. Given yesterday's events, my inclination this morning is to cancel and take the business to a more serious country. Let's see.


You will probably have heard that yesterday, 3 banking employees were killed by anarchists throwing Molotov cocktails in the centre of Athens yesterday. While Greek protests are often rowdy, they rarely turn violent to the point where innocent bystanders are killed.

This violence and the entire mind-set of marches, occupations, strikes, and protests is condoned and supported by certain political parties, primarily the Communist Party of Greece and the so-called Coalition of the Left. The trade unions associated with these two parties have, in the past two weeks, prevented tourists from entering their hotels in central Athens and a cruise ship in Piraeus; occupied the Acropolis and hung banners from its walls; and otherwise disrupted the social and economic life of the country. The student unions associated with these two parties have, in the recent past, attacked university professors, occupied university grounds, destroyed or looted university property, and otherwise done everything possible to disrupt and abuse the benefits of the public education system.

The hotel we have chosen for the project meeting is the XXXXXX. It’s in an isolated, quiet spot in Kolonaki, removed from the square, but about 600-800 metres from Parliament. Violence or protests rarely spill over into this area (the politicians would be prevented from drinking their EUR 5 coffees if it did), but as with all things in life, there are no guarantees.

The future is also highly uncertain. While I don’t expect the same intensity of protests, there is nothing to say that they won’t continue, even sporadically.

Unfortunately, neither I, nor my company, nor the hotel can guarantee the public safety of its guests, either within the hotel grounds, or outside it.

I estimate the chances of something untoward happening at less than 1%, I would like to ask, given the circumstances, whether you would prefer to organise the project meeting in another country. If we decide to meet in Athens, an alternative would be to organise the event outside the city centre.

Please let me know what you decide, so I can make timely arrangements.

Thanks and best regards,


Wednesday 5 May 2010

Athens burning

Sitting in the lobby of the Hilton hotel in Nicosia, writing a business plan for a Ukrainian packaging manufacturer, I’m a long way from the swirling smoke and flames of Athens, where three people died in a molotov attack today. And yet, despite the distance, and the very removal from all things Greek, I cannot work. It’s difficult to understand what is more surprising: that three people died today, or that more people have not died?

I reflect that Molotov cocktails and lots of other weapons, have been regularly used by demonstrators for years now. Cobblestones, marble slabs, crowbars, and smoke bombs are all part of the well-prepared demonstrator’s arsenal these days. The university community has discovered any number of incidents where, taking advantage of university immunity, these “anarchists” use university classrooms to prepare their arsenals.

And yet nothing is done. The tolerance of political violence has become de rigeur in modern Greece. At the everyday level, you see it in the roiling mob trying to break through a police cordon—to do what, exactly? It’s not clear.

At the extreme level, it’s seen in the large number of self-styled “terrorist” groups, with absurd names like the “Cells of Fire”, who bomb, shoot or otherwise attack car dealerships, banks, police stations and any other symbol of “oppression.”

What we saw today is nothing more than a natural culmination of generations of stupidity and incompetence. For years, political parties have woven a mantra of exceptionalism over their supporters, and over Greek society as a whole. We could borrow money, without having to pay it back. We could pack the public administration with legions of incompetents, and never pay the price. We could allow dim-witted social failures to bring violence into the university community or the union movement, and never suffer the consequences. Somehow, we were the one country in the world were normal laws did not apply.

Today, three innocent employees suffered the consequences. They paid for this political fantasy with their lives. You can imagine them waking up in the morning, getting ready for work, worried about beating the traffic, or making the bus, or finding a parking place. You can imagine them thinking of the weekend, or of getting home at night. Their ordinary, everyday lives were ended in a moment of panic, a breathless flight into asphyxiation, trying to escape the smoke and flames lit by a pack of social retards. One of them was apparently a young mother, 4 months pregnant.

Perhaps the political parties and unions of the left will reflect that they have lit a fire which cannot easily be put out. But I do not expect this to happen. I expect more obscene rhetoric of how all this is somehow necessary in the cataclysmic struggle against the forces of evil, the IMF, the bankers and other various groups intent on subjugating Greece. I expect the Prime Minister to make some meaningless gesture, harp some vapid words. And I expect the media to go into their usual frenzy. In the meantime, three families mourn the meaningless, irrevocable loss of their loved ones.

There will be no solution to Greece’s problems until a new, post-ideological political movement is formed which will offer specific solutions and sweep the political deadwood from power. There are no solutions in the parasitical duopoly of today; not even a semblance of real-world rationality in the remaining three parties. The sooner we understand this and begin doing something about it, the better.