Stupidity is the gift that keeps on giving

I have been rather absent from the blog, at least on the topic of Greece since the election. This has been due to desperation. I had argued against voting for Syriza again, fearing that their disastrous 7 months in power would be followed by more where they to be re-elected.

Now, about a month in, we have good evidence that the cluelessness, incompetence and politicking that characterized Tsipra’s first term continues unabated. Let us pick two examples (there are plenty, but anyway), the church-state relationship and VAT increases.

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One would expect a government of the ‘left’ headed by (supposedly, and trips to Athos aside) an atheist (Tsipras) to have a healthy attitude towards the church. Syriza had promised to distance the state from the church (in education primarily) and many were hoping that the rich Greek church would be made to participate in the fiscal consolidation taking place, sharing with the rest of the population.

Alas, this was not meant to be. After a very brief argument about making the religion class optional at school, Syriza folded. All remains as is. I am particularly incensed by this as I have been on the receiving end of this ‘education’. My ‘religion’ class at the lyceum (final 3 years of obligatory education, ages 15-18) was taught by a priest. A scrawny little excuse for a man. He explained to us at length -over years- how masturbation leads to eternal damnation, how the Jews are conspiring against Greece, how homosexuality is a crime against God and other such pleasant (yet extremely commonplace) edicts of Orthodoxy. The religion class at the Greek school should not be made optional, it should be eradicated. People that want to send their kids to be indoctrinated into hate propaganda can go to Sunday school.

The proud government of the left rounded its ‘assault’ on the Church today by exempting them from capital controls. Bravo!

Moving on to VAT increases. Mr Tsipras, with the wholehearted help of the Troika, has succeeded in creating (but he negotiated for 17 hours straight!) the worlds stupidest tax system. We know (I can offer the literature if you wish) that in countries with severe tax collection problems, the best strategy is a flat tax rate set at low levels. The rationale behind this is that if you cannot collect taxes anyway, there is no point trying to increase rates. A low level tax, without loopholes and gimmicks, creates a predictable, easy to monitor and implement system. Coupled with strict fines for violations, this can gradually create a culture of compliance. If the burden of compliance is low, and the cost of evasion high, larger numbers of taxpayers actually turn up and pay their taxes. Sounds outlandish? Poland tried it in the 1990s and it worked.

What Greece is doing is the exact opposite. The tax system is an utter mess, with incredible levels of over taxation. As tax evasion is rife and ensures that self-reported incomes are not taxable, the entire burden of taxation falls on assets one cannot hide (ENFIA property tax) and indirect taxation, like VAT. The VAT regime especially is such a mess, the Troika and everyone in the Greek government should have died of shame. Not only are there multiple rates of tax on similar items (pork vs beef sandwiches will be differently taxed, whether hot or cold also differently taxed, whether bought on an Aegean or Ionian island also differently taxed), they are also variably taxed depending on where bought, or where consumption/use is intended to take place. The latter stupidity was enhanced after the cancellation of VAT exemptions for some(!) islands in the Aegean.

This is illogical, impractical, and useless. Amongst all of this, the government is looking for ‘countervailing’ measures to correct some ‘injustices’ of the bailout agreement.

As people said on twitter, those ‘countervailing measures’ of today are the equivalent of the ‘money exists’ pronouncement of Yorgos Papandreou in 2009. Fantasy from a group of incompetents. But worry not, as Michelogiannakis said (Syriza MP), the people should not complain, as they knew what they were voting for.

Indeed.

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@iGlinavos

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7 thoughts on “Stupidity is the gift that keeps on giving

  1. I was told it was a Greek proverb.

    “Against stupidity even the Gods will fight in vain”

    I admit that I favored Syriza to win the election and than hope for the best. The assumption was that they were probably the only ones that could convince the electorate that reforms were unavoidable en desperately needed.

    And then I read your article. And one on Klaus Kastner’s blog on Cadastral reforms and started to wonder whether Greece will make it through October.

    Therefore a small note on the bright side. The Dutch tax authorities are setting up a special branch to go after the big tax-evaders. I guess that was about time.

    Other countries are working on the same concept, but the shining example for them all would be the Greek branch, which outperformed them all.

    Easy pickings perhaps, but something is moving into the right direction.

    Like

  2. mikenetherlands says:

    The problem is more complex in Greece, Pim. The tax system is not fair in Greece, so it will never accepted by the Greeks. And many times it is not an matter of tax-evading, in many cases it is an matter of not having the money to pay the tax.

    The VAT increases is an disaster. And, again, highly unfair. Even an tramp had an tax increase this way. I agree, replace this stupid tax system for a simple, clear and fair system.

    And state and education have to be separated from religion. With no exceptions. State and education have to be strictly neutral in my opinion.

    I am very, very, disappointed by SYRIZA. I had the hope in the beginning that they would rebuild Greece, but they are absolute incompetent.

    Like

    • @ mike,
      A tax on income is always fairer than a tax on consumption. Problem is that you need a reliable and an efficient system of registering income. In Holland we have that more or less achieved.

      I no longer do not have to fill in a tax form. I only have to confirm, that what the authorities already know about my income, is correct.

      Therefore in Holland to we see a pressure to shift taxation from income to consumption. Supported by the environmental left. In the false assumption that we would consume less if we would be taxed more. The right of course arguing that if we tax less on income, employment would be cheaper and lower income tax would benefit employment.

      However, as I can’t square less consumption with more employment, one of the two arguments seems to be flawed.

      As the less better off usually spend all of their net income on consumption, there is no escape from the 23% additional tax in the form of VAT.

      The better off usually do not spend their total net income on consumption, so they favor a higher tax on consumption against a higher tax on income.

      For a party like Syriza, representing the less better off, you would expect a plea for less VAT and higher income taxes. Unfortunately they had to negotiate with representatives of the better off, who collectively do not believe in higher taxes for themselves.

      Anyway, I totally agree with Glinavos, but what can I say morer. Its a doggone world.

      Liked by 1 person

  3. In the broken state of Greece, at least the Church is well-organised, fairly respected, and contributes to the stability of society. Who else might take care of the needy, the hungry and the hopeless. The Marxist dreamers may have noble welfare dreams, but they are very short of resources.

    The latest State Budget Execution Monthly Bulletin (Sep 2015) plus “rumours” don’t look good.
    For the period Jan-Sep 2015:
    – Revenues roughly €4.9bn lower than estimated.
    – Expenditures roughly €4.4bn lower than estimated, but, according to numbers floating around on the web, that’s probably due to €6bn or so of gov’t payment arrears (payments postponed more than 3 months).
    – Budget balance roughly €1.9bn deficit (reported) but more likely in the order of €8bn due to payment arrears.
    http://www.minfin.gr/sites/default/files/financial_files/BULLETIN_9_2015_preliminary.pdf

    Liked by 1 person

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