Greece has started using a real estate tax, billed and collected along with electricity bills. Here are a few lifts from yesterday's NYT article; my comments will follow.
Greeks Balk at Paying New Property Tax - NYTimes.com.
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.
and
“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 first quoted section might lead one to note that the new property tax falls on those who own buildings, and lightly or not at all on those who own vacant land or parking lots, or garden plots within the city limits!
The second section points out a number of the problems with trying to tax income.
So what should Greece do? Place its primary tax on its land value. Collect it month in and month out, not just from electric utility customers, but from every landholder, according to the value of their holdings. Value the land well, and leave the buildings and other improvements out of the equation completely.
For further reading, some might be interested in John Codman's (short) book, "Unemployment and our Revenue Problem."
Comments