The Taxman Cometh

ATHENS — The central Athens neighborhood of Kolonaki is the native habitat of Greece’s moneyed elite. The streets here are lined with some of the world’s most expensive brands — Cartier, Louis Vuitton, Bulgari — and pleasant cafes steaming up $6 coffees.

But these days, the inhabitants of this exclusive enclave are nervous. Under pressure from both international bond markets and its eurozone partners to hack its budget deficit down to size, the Greek government has its eye out for tax evaders. There has long been a disconnect between the wealth on display in Greece and what’s officially reported to the government — according to official statistics, fewer than 3,000 Greeks, in a country of 11 million, declared earnings of more than $250,000 a year in 2008  —  but the taxman is now starting to zero in on signs of conspicuous spending like undeclared swimming pools and luxury cars.

In May, the Greek Finance Ministry released a list of 57 doctors accused of squirreling away millions without paying taxes and is preparing a second list of celebrities, lawyers, and nightclub owners. It also says it will auction the properties of people who owe large sums to the state.

But Greeks are waiting to see whether the moves are more than PR. They want to see people — especially the country’s Prada-clad, BMW-driving elite — held to account. In recent weeks, during marches and riots against a raft of painful government austerity measures, the chant of "Thieves! Thieves!" has come to encapsulate popular anger.

The rot in Greece’s ruling class runs deep, and the governing PASOK party has yet to prove it is committed to sweeping out its own rubbish. One positive sign is the May 17 resignation on of the country’s deputy culture and tourism minister, Angela Gerekou, after a local newspaper revealed that her husband, a famous singer, owed nearly $7 million to the state. A former Greek transport minister, Anastasios Mantelis, is also facing criminal charges over allegations that he accepted bribes from the German electronics company Siemens in return for helping secure a government contract.

Greeks know their system is bankrupt, morally as well as financially: Corruption and rampant tax evasion have corroded the core of the state, a reality people experience daily in their collapsing services. The country is reaping the bitter harvest of decades of societywide irresponsibility. Ordinary people blame their leaders, but the reality is everyone is complicit. At the top, the abuses are only more flagrant.

Take a shop owner not far from my house, whom I’ll call Costas. I asked him recently if he could show me how his cash register worked — shopkeepers are required to issue official receipts and print out daily summaries so that sales tax can be collected — and offered to buy some batteries so he wouldn’t have to pay taxes on something he didn’t sell. I shouldn’t worry, he assured me. He hadn’t issued a legal receipt all day.

When I asked Costas how he could condemn Greek political leaders when he was doing the same thing — albeit on a smaller scale — he said powerful Greeks evaded taxes because they could; ordinary Greeks did it to keep up with the others. "The elites set the example," he said.

Part of the problem is the country’s byzantine bureaucracy and tax structure, which makes doing business (or paying taxes or getting a driver’s license or applying for a building permit) mind-numbingly frustrating. According to the World Bank, Greece ranks 109th out of 185 countries for the ease of doing business and 140th for starting a business. That’s far below any other eurozone country.

But the greater reality is that a culture of impunity has reigned across Greek society. In the tax office, the government is taking steps to clean its own house — investigating the real estate holdings of employees, shuffling officials around to move them out of areas where they have close personal ties, and opening inquiries into complaints of corruption.

If the government follows through with these and other promises, it could help start the slow process of rebuilding trust between citizens and the state. But to emerge from this crisis, the country needs a radical overhaul not just of its state, but of its whole society. Greeks have an almost feudal relationship to their government. They are at once contemptuous and expectant; they want generous social benefits without having to pay for them.

That attitude is a legacy of the country’s tumultuous past and the rise of the left after the country’s 1967-1974 military junta. Greek politics — with its Communists, anarchists, and other radical leftists — is still fossilized in the outmoded politics of the 1970s, an ideology whose limitations the current crisis has baldly exposed.

At its most radical, the Greek left offers only destruction — blow up the system because even nothing is better than what we have! That’s not a philosophy that resonates widely beyond a few disenfranchised youth. Meanwhile, the governing Socialists have been forced into the arms of the despised International Monetary Fund (IMF) and have had to adopt that institution’s liberal economic policies. But most Greeks recognize that the country had no other options. Few took seriously, for example, the suggestion by one leftist parliamentary grouping, the Coalition of the Radical Left, that the country hold a referendum on whether to accept the IMF-EU bailout.

Even in places that should be the heartland of the Greek left, many acknowledge the need for change. I spent an afternoon recently at a failing Greek shipyard, talking to workers as they gossiped out the workday over glasses of milky ouzo. Many had been employed there for decades and said they’d never seen times so bad. The dry docks, where ships are hauled out of the water for repairs, were empty and there was little work. I expected to hear the same complaints about rich capitalists squeezing workers, but instead they blamed their own union for driving away business.

"When a shipowner wants to bring a ship to be repaired here, the union goes on strike," said Vassilis Handrinos, a pipe fitter. "So instead, he takes it to Turkey or Beirut, where it’s cheaper." I asked if he thought employers would use the crisis to cut back on worker benefits and pay. "Good!" he exclaimed, thumping his fist on the table. "Maybe then we’d be more competitive."

More than anything, Greece needs new ideas. The old Greece is dying. What sort of Greece — and to a degree what sort of Europe — emerges in its place will depend on whether the country’s leaders have the vision, and the will, to wrench the country into the modern era.