Monday 15 October 2012

Your Tax is in the Mail (and at the Pump)

This week starts with the unwelcome news that long-announced new taxes are being implemented in Greece. This is seen in the heating oil distribution “season” which started today, and in the mailing of the 2010 property tax.

Heating Oil Distribution

The reality of tax increases on heating oil for housing hits this week, as distribution has officially started. Tax increases announced since last year have the effect of raising the price from about EUR 0.95 cents per litre at the beginning of 2012 to EUR 1.40 cents per litre now. Obviously, everyone is up in arms. Greece has benefitted from very warm weather so far this month, with daily temperatures running at 25 degrees. This will end as winter sets in.

This is one of the more regressive measures, despite the theoretical mechanism put into place to support lower-income families by giving them (yet another) subsidy. Rather than liberalising the sector, for instance by promoting competition at the refining, importing and distribution, and allowing year-round distribution, the Greek government is piling bureaucracy upon bureaucracy and tax upon tax upon what should be a simple task, and punishing the poor and middle class in order to collect higher taxes.

Even competition will not result in a significant change in fuel prices: of the EUR 1.40 charged for 1 litre of fuel, only about 20 cents are refiner, distributor and retailer margins. The rest is tax.  

2010 Property Tax Mailed Today

Today also marks the date when the 2010 property tax is mailed to property owners. This astounding story of delay dates back to the Karamanlis and Papandreou administrations. To make a long story short, the current government is finally implementing this measure, with their customary excellent timing (in the middle of a depression).

We should remember that this year, property is already being taxed via a special contribution on electricity bills (which has been split into 5 instalments). So this property tax is in fact the second such tax to be paid this year, and is entirely separate from additional municipal or broadcaster taxes levied on the electricity bill, and also separate from the “solidarity” tax on incomes levied on the income tax statement. There is also a third property tax, for high value properties. And there is also value-added tax on property transactions, which adds a fourth layer of taxation.

This plethora of taxes on immovable property is indicative of just how badly planned the tax system is, particularly when one considered that there is no independent valuation of a property involved, but it is based on district zoning coefficients, “objective values” and other purely theoretical means of valuation.

The direct impact of these taxes are clear: new construction and housing sales have plummeted; there are thousands of builders out of work; hundreds of construction firms have closed; and the burden of taxation remains disproportionately on the poor and middle classes.

Hundreds of thousands of households have not been able to pay the previous property taxes. The Greek Public Power Company reports that over 500,000 household electricity bills remain unpaid (this number may in fact be higher).

So the government is doubling down, by increasing the number of taxes that people are unable to pay. In the meantime, the “Lagarde disk” of some 2,000 names of account holders at HSBC Geneva together with several other lists of suspicious transactions make their merry way through the media, while the transactions holders presumably make their way further offshore.

PASOK's well-nourished head, Evangelos Venizelos, who was apparently responsible for the "disappearance" of the Lagarde list, continues to speak of social justice. 

It should come as absolutely no surprise that in the latest Public Issue poll carried out for Skai (October 2012), SYRIZA is polling at 43% in voter intentions, versus 33% for New Democracy. 

"The most difficult choice a politician must ever make is whether to be a hypocrite or a liar."

© Philip Ammerman, 2012

Philip is Managing Partner of Navigator Consulting Group and European Consulting Network.

1 comment:

  1. Can't she just resend the list or even just post it on facebook?