Greeks Balk at Paying Steep New Property Tax http://www.nytimes.com/2011/11/28/wo...perty-tax.html
November 27, 2011
By SUZANNE DALEY
NEA IONIA, Greece — Ioannis Chatzis is 86 and lives in a tiny, single room, surviving on a pension that is just enough to pay for food and care for his bedridden wife.
But in its latest push to raise cash, the Greek government sent him a new $372 real estate tax bill, incorporated into his October electric statement.
Mr. Chatzis says he is being asked to choose between lights and paying for his wife’s medicines, since he cannot afford both on his $720-a-month pension.
“This is how we are treated,” he said recently, his face a mixture of fury and despair. “I have nothing left to give. I will not be paying it.”
Mr. Chatzis is far from alone in that vow, and it is not certain that the Greek government will do anything about the tax rebels.
As the first due dates approach on the Greek government’s novel idea of linking electricity to tax payments, a growing resentment is settling over many parts of this country — one that some local officials believe could even shake its political stability.
Already there are pockets of resistance popping up in dozens of areas, including this northern suburb of Athens, where Mayor Iraklis Gotsis has promised to fight the tax bills in court. He has also organized a group of electricians willing to reconnect — illegally — anyone who is cut off. “This thing on top of all the other taxes and salary cuts has made people snap,” Mr. Gotsis said recently. “It is the drop that made the glass full.”
Many Greeks consider the new tax, which makes no exceptions for the unemployed or the elderly and is much higher than any real estate tax they have paid before, to be one more sign of the tough austerity measures they are suffering under as a requirement for European aid. European finance ministers will meet Tuesday to decide whether to release the next $10.6 billion allotment to the Greek government.
In the past, most Greeks paid real estate taxes when they bought, sold or inherited property. They also paid comparatively small yearly taxes to municipalities. Someone in Mr. Chatzis’s circumstances might have paid less than $133 a year in total. Now he will have to pay an additional $373 this year and the next.
In September, under pressure to come up with $2.6 billion to close a budget gap, and losing the battle against tax cheats, Greek officials settled on the idea of linking a new real estate tax to bills from the government-owned power company.
The new tax, which they say they will levy again next year, is based on square footage, the age of the building and the average value of a neighborhood, and has nothing to do with the taxpayer’s income.
But lately, even the government seems to be having second thoughts about the tax. Last week, the power company announced that it would send out cutoff notices, but said that it would hold back on taking any such measures until the government had considered the circumstances of the affected families. Meanwhile, union workers occupied the power company’s billing center, preventing any new bills from going out. Some Greeks just do not believe that the government will ever have the nerve to cut power to thousands of homes. They say it will be yet another change of course, as is so often the case here. Deadlines are set and then rescinded. Tough tax laws are put forth and then amnesties are offered.
“I honestly don’t believe they will do this,” said Pantelis Ksiridakis, the mayor of a wealthier suburb, who described the policy as a form of blackmail that may work for the rich, but is crushing to the poor. “They are pushing people to the limit with this.”
“This is a tax that nobody expected, and they are demanding cash. No structured payments,” he added.
In Nea Ionia, Mayor Gotsis has offered to have municipal lawyers defend those who cannot, or will not, pay the tax; about 1,000 residents have come forward so far.
Most, he said, fall into the first category. Greece’s creditors, he said, forget that large numbers of Greeks, even if they have evaded taxes at the margins, are not wealthy. About 25 percent of the small stores in Nea Ionia have closed in the last two years, hit hard by the country’s deepening recession and rising unemployment rate.
Vangelis Avlonitis is one of the electricians who has volunteered to restore power, if the mayor asks him to. His shop is not far from Town Hall and is decorated these days with the neon signs he made for his customers before their shops went out of business.
Mr. Avlonitis says he is barely scraping by himself. But for others it is much worse. One neighbor stopped by last week and told him her pension was $440 a month and her tax bill was $480.
“This is ridiculous,” he said, pointing out a ladder he had bought in case the power company cut the electricity at the poles.
Not everyone in this suburb is refusing to pay. Some say they will find the money because they believe their country is in trouble. One man, who declined to give his name, said he, too, had lost his business — a snack shop — last year. But he is surviving on the income from a few properties he owns and will pay the new tax.
“We have to help the state,” he said. “The tax is unfair. We are not the first ones who should be paying. The ones who have Swiss bank accounts should be paying. But that is still how things are here.”
The Greek government has struggled to improve tax collection. At first, officials were optimistic that they could capture at least a portion of an estimated $27 billion in unpaid taxes each year.
Various experts have put Greece’s shadow economy at about 25 percent of its gross domestic product, compared with less than 8 percent for the United States.
But last year, Greek officials collected even less than the year before. Some of the decline in revenues resulted from the decline in the economy. But some new tax collection strategies — incentives to collect receipts so that fewer business could work off the books, for instance — backfired and actually reduced people’s tax bills.
And the state seemed to make little progress in getting the scofflaws to pay. Some 70 percent of the tax collected came from salaried employees and retirees, who have little way to hide their income. Meanwhile, 7 out of 10 self-employed workers, including doctors, dentists, engineers, accountants, taxi drivers and small business owners, indicated on their tax forms that they had made less than $16,000 a year, a figure that most experts find laughable.
The Greek Public Power Corporation recently announced that of the 86,000 bills that came due recently — a tiny fraction of the 5.5 million households in Greece — 73 percent had been paid. Its press release struck an optimistic tone, suggesting the rate of payment was similar to the usual rate.
But critics point out that such a percentage means that the government could be facing the prospect of tens of thousands of shut-offs in the middle of winter.
Some of the rebellious pushback has bordered on the humorous. For instance, the Health Ministry in downtown Athens was in the dark for four hours last week, courtesy of the power company’s union workers.
Since government ministries owe the power company $180 million, the union argues, why shouldn’t they suffer cutoffs?
There are also half a dozen legal protests pending. And a YouTube video describing how to reconnect your electricity if you get cut off has gone viral.
In Nea Ionia recently, Mr. Chatzis, sitting near an electric heater at a friend’s hardware store, was fretting about the tax bill and remembering the years he spent as a prisoner in World War II after resisting the Axis occupation of his country. “Now it seems like the fascists are back again,” he said of the pressure on Greece to raise more revenue and narrow its budget deficit. “What did we fight for?”