PlanerPioneered in eastern Europe, flat tax systems seem to work because they are simple.


An artful taxman, according to Jean-Baptiste Colbert, treasurer to Louis XIV, so plucks the goose as to obtain the most feathers for the least hissing. Such arts are lost in America. As the April 15th deadline for filing tax returns falls due, the hissing is as audible as ever. But Americans are not alone. New Zealand's tax code instils “anger, frustration, confusion and alienation” in the islands' businessmen, according to a 2001 report to ministers. Adam Smith spoke for many when he bemoaned the “unnecessary trouble, vexation, and oppression” the people suffer at the hands of the tax-gatherers.

The Future of Education and Our Responsibility

A Perspective

Today, 29/5/2013, I read two articles, one in the New York Times (NYT) and the other in To Vima, that prompted me to write the following thoughts.

In 1991 I was surprised by an invitation of our local Public Radio station to participate in a round table discussion regarding technology innovations and how they will affect our lives.

When I arrived at the station, I was astonished when I realized that I was the only one representing Information Technology (IT) because they had said to me “technology innovations”. The rest of the participants were medical doctors, educators (University level), engineers, bioengineers, correspondences, etc. We were 16 all together.

My recollections of the highlights were that the average life expectancy, based on the research done at the time, by 2020 could reach 100 years and by 2035 to be 120 years. This, as you can imagine, made for a lively discussion. A funny comment was; how long will we be considered children?  A more serious question was; how long will we be working?

My contribution to the discussion was to express a thought I had for some time and which became very relevant after what I heard about life expectancy.

The thought was as a result of the continue education I had over the years and the fact that I changed a number of specialties within (IT). I came to believe that individuals in certain professions, especially those that evolve very fast, will have to change profession for the following three reasons:

TheWayGreeksLiveNowIn a little brick-walled taverna in Athens, over a lunch of Cretan salad and stuffed grape leaves, a Greek journalist named Aris Hadjigeorgiou was holding forth one day in late November about the calamitous state of his city and country as only a veteran metropolitan reporter could. He explicated the insidious ways in which the upper echelons of Greek media were intertwined with the political structure, which prevented reporting of financial mismanagement and also clouded any hope for resolving the crisis. And he noted little things, like the leaflets on car windshields advertising moving companies: literal signs of the way the economic crisis was affecting Athens, as people angled for escape routes, either abroad or to the countryside. And how the mayor’s office was at that moment considering a quaint but cockeyed approach for the season’s Christmas lighting scheme: stringing lights around the city’s hundreds of shuttered storefronts.

Quick Facts

  • 11.2 million
  • $318.1 billion
  • -4.5% growth
  • >0.7% 5-year compound annual growth
  • $28,434 per capita
  • 12.5%
Inflation (CPI):
  • 4.7%
FDI Inflow:
  • $2.2 billion

Greece’s economic freedom score is 55.4, making its economy the 119th freest in the 2012 Index. Its score is 4.9 points lower than last year, reflecting declines in six of the 10 economic freedoms with particularly acute problems in labor freedom, monetary freedom, and the control of government spending. Greece is ranked 39th out of 43 countries in the Europe region, and its overall score is below the world and regional averages.

Recording the largest score decline in the 2012 Index, the Greek economy is now rated “mostly unfree.” Greece continues to be challenged by a daunting debt burden and the severe erosion of competitiveness. Sparked by decades of overspending, a lack of structural reform progress, and endemic corruption, the ongoing sovereign debt turbulence must now be addressed in a climate of crisis and political instability.

A key missing element of the ongoing fiscal adjustment and reform program in Greece is the re-engineering of the anachronistic, slow, and unfair legal system. Drawing from a large body of research, I argue that improving the institutional environment protecting investors and speeding the judicial process are necessary conditions for restoring competiveness and growth. Correcting the injustices of the legal environment is also needed to raise opportunities for young entrepreneurs, lower inequality, and restore civic capital. First, I go over international indicators measuring de jure and de facto legal quality so as to put the devastating situation that one observes in Greek courts into a global perspective. Second, I discuss the main channels linking legal institutions to economic efficiency and inequality. Third, drawing on recent policy reforms in other countries, I lay down some proposals to improve the efficiency of the legal system.

This article has been written by Elias Papaioannou. The full article here.

A short version of the article in Kathimerini newspaper here.

By Elias Papaioannou
Source: Greek Economists for
Published: March 11th, 2011

Before the modern Greek state assumed its present day contours in the aftermath of the first world war, communities in the trading cities of Alexandria, Odessa, Salonika, Smyrna, and Trieste, already had a long history of running their own school systems, hospitals, and orphanages. This was partly a legacy of Ottoman rule. With the exception of political stability, the Ottomans were not in the habit of providing public goods so, when it came to public health and economic development, citizens had to fend for themselves. That system worked. Through local and communal organization, by the mid to late nineteenth century, the Greeks were one of the most prosperous and dynamic groups in Southeast Europe.

Once the Greek state was fully formed, however, a central administrative structure took over communal institutions. Powerful new national party machines displaced the local elites who'd successfully served as administrators. In Greece's second largest city, Salonika, this process took a bit more than a decade. Between 1912, when the city was integrated into the Greek Kingdom, and 1925, Salonika's schools, hospitals, and other institutions were nationalized and its local trustees were replaced by centrally appointed bureaucrats. Likewise, the responsibility for funding these institutions passed to the central government. To grasp how dramatic the change was, imagine that Washington nationalized all colleges and universities in the state of Massachusetts, Harvard included, and then ran them through political appointees.

So, as the Greek state expanded territorially it also expanded its responsibilities, undercutting old traditions of localism and community action. Herein lies the root of the country's current crisis. Long-established, autonomous local elites were displaced in the 1920s, their place taken by a new group of people adept at managing a rent-seeking relationship with the state. The new local leaders joined national parties and then worked to build up party machines by distributing state largesse. Not a single region or city of note mobilized its resources in pursuit of economic success, based on international competitiveness. Instead all major localities channeled central government resources into patronage. The central government, which was dominated by the same parties, was an energetic accomplice.

By the late 1980s, the interaction between local and national elites had already produced a highly dysfunctional system. Appointments to key institutions -- hospitals, museums, universities, and port authorities -- were not meritocratic. To become president of a university, one would need to buy off the student unions, which could deliver the votes needed to win an election. To run a hospital, one would had to have put in the time as a hanger-on of one of Greece's major national parties.

Unconditional European Union funding in the 1980s and early 1990s, and easy international borrowing in the 2000s helped both the left and right finance unsustainable patronage politics. According to Eurostat, the EU's statistical agency, public payroll expenses (salaries and pensions of civil servants) rose in Greece from 38 percent of state revenue in 2000 to 55 percent in 2009. Compounding this trend, local elites became hostile to any coherent national reform effort, precisely to preserve the system that now privileged them. For example, in the mid-2000s a local alliance in Salonica successfully resisted the granting of a concession to a major international port operator, in order to retain management of it themselves.

As long as the Greek central government was solvent, or could borrow massively, the system worked. The effort to join the eurozone in 2001 brought real benefits to the Greek economy, of course. Thanks to EU-mandated reforms, the country improved its public finances and modernized the telecom and banking sectors. Joining the eurozone also accelerated the repatriation of the globally competitive Greek shipping community and provided funding for the expansion of Greek corporations into the Balkans. Once in the eurozone, however, Greek elites were quick to revert to their former ways.

But now that the nation has gone bankrupt, it is impossible to sustain the economy through central government expenditure. This means that the local leadership has no choice but to back nationwide reform efforts that could enhance their localities' capacity for market-generated wealth creation.

The opportunities for them to do so are numerous. Take just two sectors of the Greek economy -- the higher education system and the tourism industry. A reform to abolish the participation of student unions in the election of university authorities and allow the creation of privately funded chairs already passed into law this September. The successful implementation of this reform would start to create a knowledge-based, internationally competitive Greek economy. Now local communities need to take the baton from the Ministry of Education and argue vocally for excellence and transparency in appointments to the higher education institutions they host; to actively manage the relationship between the university and the business community, emphasizing initiatives and R&D that benefits the local economy; and to activate their own networks in the diaspora to fundraise for these institutions.

At the local level, citizens also have every reason to advance reform of the critical tourist industry -- which is riddled with inefficiencies. Those in coastal cities that depend on the cruise ship industry, for example, can push for the lifting of cabotage, a regulation that prohibits cruise ships that are not crewed by Greek seamen from accessing Greek ports. Greeks in cities that host state museums can also promote reforms to facilitate private donations, which would re-introduce, through distinguished architecture and curatorial direction, their cultural legacy to an international audience. Finally, all Greek localities can push the Greek Ministry of Foreign Affairs to accelerate travel visa issuance, especially in such key markets as Turkey and Russia, where Greek consular capacity is well below demand.

The specific reforms are not as important as local stakeholders shifting decisively in favor of market generated wealth creation, as opposed to rent seeking from the state. To do this, they should take a page from their ancestors' books. Local leaders should recognize that if they do not take responsibility for the success and prosperity of their communities, noone else. Local electorates, in turn, should reward those leaders that are willing to act upon this understanding.

For its part, the Greek central government should confer broader jurisdiction on local governments -- from health and education to urban planning. It should also task them with raising the revenue necessary to exercise their new authority. In particular, local government in Greece should assume major tax raising powers, as well as many of the responsibilities that go with them. Athens must be prepared for local failures, too, otherwise it would create a moral hazard that would corrode the solidarity and self-reliance that local communities need to embrace. By decentralizing, the Athens will both revive the nation's distinguished legacy of local autonomy and move the country closer to the European norm in terms of delegation of power and authority.

Finally, key local institutions, and in particular universities and hospitals, should be pushed into the non-profit sector. They could be governed by a board of trustees and be open to donations from private individuals and organizations. The tax regime should accommodate such a governance structure granting deductions for donations. This structure would marshal additional resources and know-how from the Greek diaspora.

A majority of Greeks today cannot see a way out of the pit their country is in. But they need only look to their grandparents to find a way out.

By Antonis Kamaras
ANTONIS KAMARAS is adviser to the mayor of Thessaloniki, Greece’s second-largest city.
Source: Foreign Affairs
Published: December 13, 2011

boatgreeceflag 480Early into the crisis, Greece was portrayed as a bad egg, its people seen as victims of unchecked spending, of lost moderation, of imprudence. Greeks had to be made to pay for their mistakes.

Ordinary people were made to think so too, at least those of us who had for a long time predicted the failings of an ailing state mechanism, a vulgar political system, and a kleptocratic elite that squandered the nation’s resources.

Allegations of collective responsibility were conveniently adopted and reproduced by the individuals who were mostly to blame for the impoverishment of the people and the dismantling of the state. This was, after all, the reason why they were quick to adopt the painful rescue package designed by the European Union and the International Monetary Fund, without any serious effort to negotiate or see it through.

Lacking a sense of clear direction, or a contingency plan, Greece’s vulgar and grossly incompetent political elite put all of its energy and effort into one single objective: Saving itself. The burden was as a result placed on the victimized people and the demonized foreigners.

The Greeks were punished in many different ways. They were impoverished, sometimes to the point of destitution; and on top of that, they were humiliated. The people became the laughing stock among serious or pseudo-serious European partners, the scapegoats and the target of vitriolic attacks.

Using Greece as an example to be avoided worked. But not for long.

Attempts to ridicule Greeks, which were to some degree justified, have proved to be unfair. They seem driven by self-interest in a bid to cover up all sorts of failings and weaknesses including the structural shortcomings of the euro currency and of Europe’s elites. Greece is being dragged like a sacrificial lamb to the slaughter.

The number of black sheep in Europe, meanwhile, is growing. The idea is gaining ground on both sides of the Atlantic. And it is being consolidated as a moderate interpretation of what is happening at home and abroad, despite the relentless it’s-all-the-Greeks-fault propaganda and foreign conspiracy theories.

Truth lies somewhere in between. We can finally let Europe and the rest of the world know that Greece’s woes -- some of which are of its own making -- are the new paradigm. If Greece falls, more nations will follow; for better or worse.

By Nikos Xydakis
Published: February 17, 2012

European Union officials have nothing but praise for the mayor of the Greek city of Thessaloniki. Yiannis Boutaris has been pushing ahead with far-reaching reforms to undo the abuses of his predecessors and has already slashed the city's spending by 30 percent. He's even asking the Germans for advice.

On a recent Thursday, the mayor of the northern Greek city of Thessaloniki was sitting in an enormous office in Berlin's Tempelhof district. He didn't mince his words. "Your city is clean, while ours is dirty," said Yiannis Boutaris, speaking in a deep and gravelly voice. "What works in your city doesn't work in ours." He had come to Berlin to learn how to change this deplorable state of affairs. And he wants to do it as quickly as possible.

Boutaris, 69, is a slim, wiry man with gold-colored, metal-rimmed glasses, a gold stud in his ear and spiky gray hair. He and his delegation are visiting the headquarters of the Berlin waste utility BSR. A projector hangs on the wall above him. Boutaris has just watched a PowerPoint presentation about Berlin's approach to the "recycling of biogenic waste to use organic residual material from residential waste." He now knows that the German capital generates 1.3 million tons of garbage a year, and that the city's 200,000 dogs present one of the biggest obstacles to keeping streets clean.

Dogs are the least of his problems in Thessaloniki, where the entire waste disposal system doesn't work. Boutaris raises his hands and says: "We need your help."

The fact that the mayor of Greece's second-largest city is making this request is a minor sensation in itself. Not a day passes on which one Greek paper or another doesn't discuss the supposed parallels between present-day conditions in the country and the Nazi occupation. And now a Greek politician is asking the Germans for advice on how to clean up his city?

It would be an understatement to say that relations between the Greeks and the Germans are in bad shape. The Greeks hate German Chancellor Angela Merkel even more than their own politicians, who don't dare to go out in the streets anymore. The Greeks believe that the austerity measures Merkel is demanding of them are making their lives increasingly impossible.

A New Project

Boutaris is the most unusual politician in Greece, despite his insistence that he is not a politician at all. In fact, he says, he is the opposite of a politician, a businessman who has taken on a new project: running the city of Thessaloniki, where he has been mayor for almost exactly a year.

It's relatively uncommon for the international observers working for the so-called troika of the European Union, the International Monetary Fund (IMF) and the European Central Bank (ECB) in Athens to say something complimentary about a Greek politician. And it's almost unheard of for them to praise a Greek for his penchant for reform, as they are doing with Boutaris. In their reports home, the officials write that, since Boutaris came into office, Thessaloniki has been an "island of hope" and a "model for all of Greece." A member of the European Commission team in Athens says: "Boutaris is the exception, a beacon. Everyone else can learn something from him."

The widely praised politician is actually a vintner by trade. His Xinomavro, Syrah and Merlot wines have won gold medals in international competitions. He turned over his vineyard to his three children when he decided, a few years ago, to devote his full attention to the city.

Seven years ago he established the "Initiative for Thessaloniki," a sort of citizens' association. He began cycling through the city as part of a campaign for more public transportation and better upkeep of public spaces. He has been the mayor since January 2011 and is not affiliated with any party, although the center-left Panhellenic Socialist Movement (PASOK) supported him in the election.

'Honest Things'

"It took a while, but now I know how everything works here," says Boutaris, with a grimace of his wrinkled face. He is standing in front of a pin board in his office in the city hall, a dreary concrete block of a building. It's around noon on a February day. Janis Joplin's raspy voice is playing on the stereo. Tacked to the pin board behind him is a piece of white paper. Written on it, in English, is the message: "We're going to believe in honest things again."

"The good thing about the crisis," says Boutaris, is that the Greeks are being forced to change their way of thinking, and that the politicians' empty promises and irresponsible actions have come to an end. "There isn't any money left to buy voters," says Boutaris. As a result, he says, politicians actually have to do something.

Shortly after taking office, Boutaris traveled to Istanbul to launch a campaign to convince the Turks, Greece's traditional enemies, to pay a visit to "our old city." (Thessaloniki was part of the Ottoman Empire until 1912.) Since Boutaris's trip to Istanbul, Turkish Airlines resumed direct flights between the two cities, and the number of Turkish tourists has doubled within the last year. Tourism is an important source of revenue for Thessaloniki, where unemployment is at 25 percent.

But Boutaris can boast of his biggest successes in the reorganization of the city administration. Boutaris is voluntarily doing what Europeans have been demanding of the rest of Greece for the last two years with each new loan agreement, and what is now supposed to be achieved through international assistance: He is trying to make his city function more effectively.

In his first week as mayor, Boutaris hired an auditor. It was a novelty, and not just for Thessaloniki. "Now we know exactly how poor we are," he says. The city now has a budget and an accounting system, and all expenditures are carefully monitored -- not exactly a given in Greece.

'The City Was Rotten'

Thessaloniki's deputy mayor, Spiros Pengas, 43, is sitting in a café in the Museum of Byzantine Culture next to the city hall. "If the crisis hadn't happened, we wouldn't have made it," he says. "The city was rotten."

Thessaloniki was always seen as a stronghold of the conservatives and nationalists. Hellenization was pursued with particular zeal in the region, which was considered the "gateway to the Balkans" and was home to many different ethnic groups, which did not necessarily get along. The conservative New Democracy party controlled city hall for 24 years, holding the city hostage with its cronies.

During the election campaign, the local archbishop refused to allow Boutaris to kiss the cross during mass, even imposing an excommunication of sorts on the candidate: "As long as I am in office, you will not see the inside of city hall." A television crew recorded the incident, and when the footage was aired even conservative citizens were outraged over the archbishop's audacity. "People wanted change. They realized that things couldn't go on that way," says Pengas. Under Boutaris's predecessor, €51.4 million ($68.4 million) had suddenly and inexplicably disappeared from the city budget. No one knew what had happened to the money. A former prefect is now under investigation in the case.

Pengas, who studied political science in Munich, also never intended to be a politician. "I felt that there was too much of a divide between German theory and Greek practice," he says. Boutaris convinced him to change his mind and go into politics. His team includes many people like Pengas. They are young, most of them only half as old as Boutaris, and their roots are not in politics. One member of his staff was an analyst with the Bank of Greece, while another worked for a management consulting firm.

Significant Tattoos

Boutaris presents a stark contrast to his predecessors. This is partly because he doesn't hide the fact that his life hasn't always been perfect. Boutaris is a professed alcoholic, after having been a heavy drinker for 10 years. Each year, in addition to his birthday, he celebrates the day he stopped drinking. He has been dry for 21 years now. He was once divorced, for seven years, and then he remarried his ex-wife. For Orthodox Greece, all of this unconcealed life experience is unusual. When his wife died in 2007, he had a unicorn tattooed onto his forearm, in remembrance of her "remarkable spirit." When he had decided that it was time to stop mourning his dead wife, he had a lizard tattooed on the back of his hand, a creature whose habit of molting was meant to remind him that change is in the nature of things.

Perhaps it is the constant view of the gecko on his hand that motivates him to take on issues that others have given up as hopeless long ago.

For instance, Boutaris has hired a personnel manager to evaluate civil servants and their work. French administrative experts, working on behalf of the EU's Task Force for Greece, are trying to implement the principle of performance-oriented work in the public sector throughout Greece. They are making little progress in the face of considerable resistance.

In Thessaloniki, Vassilis Kappas, 42, addresses reforms in the city administration. He says: "We have almost 5,000 employees here, but we only need 3,000." According to Kappas, many have never learned to work. In the past, voting for the right candidate was enough to receive a lifelong job as a civil servant. Cronyism had deprived the political system of its effectiveness. Kappas has developed a plan that reduces the number of directorates in city hall from 32 to 20. The city council is scheduled to vote on the proposal soon.

Discarding a Broken System

"Crazy things were going on here," like a system of fictitious overtime, says Kappas. Most city employees had accumulated hundreds of hours of overtime, but they had never documented the details. Now there is a cap on the number of possible overtime hours and how much employees can be paid for them. The success of the new rules is reflected in the city's expenditures, which dropped by 30 percent in 2011. The budget deficit, which normally doubled every year, shrank for the first time -- by 7.5 percent.

The mayor's opponents in the city council attacked him for his trip to Germany, while the Athens daily newspaper Kathimerini questioned his sanity for soliciting advice from the Germans, of all people.

But Boutaris also intends to ask officials in other countries how they dispose of their garbage and manage their ports. No one can repair or improve a broken system, he says. "It has to be discarded, and something else has to take its place," says Boutaris.

He takes a drag from his unfiltered cigarette. Speaking in a voice as raspy as Janis Joplin's, he says that everyone has to understand this fact -- both the citizens of Thessaloniki and all Greeks.

By Julia Amalia Heyer
Translated from the German by Christopher Sultan
Published: February 15th, 2012

cayenneWhich city tops the global list of per capita ownership of Porsche Cayennes? It’s arguably a 100,000 euro question, the starting price for Porsche’s pricey SUV.

London, New York or Larisa? Don’t laugh, but the correct answer is the third.

Larisa, which has about 250,000 inhabitants, is the capital of the agricultural region of Thessaly in central Greece.

As Professor Herakles Polemarchakis, the former head of the Greek prime minister’s economic department, wrote in a recently published article, Larissa “is the talk of the town in Stuttgart, the cradle of the German automobile industry, and, particularly, in the Porsche headquarters there”, since it “tops the list, world-wide, for the per-capita ownership of Porsche Cayennes”.

“The proliferation of Cayennes is a curiosity, given that farming is not a flourishing sector in Greece, where agricultural output generates a mere 3.2 percent of GNP in 2009 (down from 6.65 percent in 2000) and transfers and subsidies from the European Commission provide roughly half of the nation’s agricultural income,” Polemarchakis’ wrote, in a recent article that appeared in the Bulletin of the Economics Research Institute of the University of Warwick, where he teaches economics.

“A couple of years ago, there were more Cayennes circulating in Greece than individuals who declared and paid taxes on an annual income of more than 50,000 euros,” he pointed out.

Regarding the Greek debt crisis, Polemarchakis, a once close friend of George Papandreou, noted that there is no easy way out, drawing a parallel with the situation in medicine.

“One can recall a time when modern medicine, despite its research in biology and chemistry, could not treat or cure for illness that have since been conquered. When modern medicine failed, desperate patients turned to the village medicine man and his promises. A Western doctor visiting Egypt a few years ago, for instance, was shocked to find that villagers preserved and nibbled on crocodile heart as a cure for impotence, as the local medicine man had advised,” he wrote.

He added that in economics, buffeted by politics and public opinion, the temptation to find someone who offers fast and easy solutions, the economic equivalent of the medicine man, proves almost irresistible in promising to cure suffering and loss.

“These crises of our times create an urgent call for good economics: the intellectually demanding, hard core theory and empirical work that provide the underpinnings for sound economic policies,” he continued.

Polemarchakis’ concluding remark is that “these policies will not offer quick, painless solutions to the world’s economic woes. Alas, for Greece and other nations, there is no viable crocodile heart cure.”

By Costas Papachlimintzos
Source: Athens News
Published: October 24th, 2011

Triantopoulos1HOPING to overcome the prevalent atmosphere of economic decline and gloom in the country, a group of highly successful young entrepreneurs from sectors like retail to biotechnology have joined forces to offer their experience and advice to a new generation of Greek entrepreneurs. Vasilis Triantopoulos, head of the Young Entrepreneurs Association Hellas, represents the optimism of the endeavour, which they hope to take even to high-school classrooms.

Holding a BA in information management systems, he started his climb to business success at the age of 21 by representing several foreign information technology companies and internet service providers in Greece and the Balkans. Now, 19 years later, he is CEO of the London-based Bioaxis Healthcare, provider of specialised healthcare services throughout Europe and a board member of several hi-tech companies in Greece and abroad. In his interview with the Athens News, Triantopoulos explains why his success story can be emulated by a new generation of business starters.

Athens News: What are the principal goals of the Young Entrepreneurs Association Hellas?

Vasilis Triantopoulos: YEAH was created in 2007 under the brand name Young Leaders by a group of successful young businessmen to advance the common interests of youthful Greek entrepreneurs at home as well as abroad. The aim is to promote and instil the values of entrepreneurship in the younger generation of our country which remains full of vitality, dynamism and fresh ideas despite the difficult times and is looking for ways and means to realise its dreams. In our seminars and conferences we try to provide these young people with appropriate ‘mentorship’ - the role models they should emulate and the necessary skills, infrastructure and guidance they need in order to succeed. We help them overcome their fear of failure by applying Aristotle Onassis’ famous motto, “Failure comes only when you stop trying”. At the same time, we consult with other businesses or chambers of commerce on joint initiatives and contacts with senior officials at the development ministry to alert authorities about bureaucratic or institutional obstacles to new business ventures and to propose measures to rectify the situation.

Speaking about authorities, are you in contact with the troika, Greece’s creditors?

We have met on several occasions with troika mission staff in Athens to inform them about reform priorities, market data reliability issues and problems confronting Greek entrepreneurship. Unfortunately, the troika policy guidelines are often implemented by the government in a one-sided manner because local politicians have no interest in public sector cutbacks or in fighting tax evasion and corruption without penalising local entrepreneurship. On the other hand, no successful professional or businessman would risk working for the common good by assuming government duties without being firmly assured that his hands won’t be tied by vested interests in the public sector. You can’t have somebody like [Lucas] Papademos for prime minister and somebody like [Evangelos] Venizelos heading the finance ministry. Technocrats and politicians can’t work together. I think that this is the moment Greece truly needs a technocratic government - not just a technocrat prime minister - for at least two years, to lay the groundwork for a modernised state.

What in your opinion are the troika’s errors which politicians may use to promote their own interests?

First of all, the troika is fed with erroneous statistics by the Athens Chamber of Commerce or by ministries about the aggregate number of business startups and closures in the country. We want to rectify this by showing that a great many startups are little more than shortlived attempts by one or two persons trying to break out of unemployment or to grab some ready-made investment subsidy, rather than to actualise an innovative idea with a coherent business plan and carefully planned steps. The majority of registered closures also fall under the same category as futile small-scale ventures that don’t survive more than two to three years. True business startups that satisfy the minimal criteria of longterm viability and success are few and far between. At the same time, existing business regulations prevent the closure of significant enterprises with a track record of more than five years and several employees on their payroll, pushing the companies to the brink of collapse by massive debts. It is therefore not enough to eliminate the paperwork and simplify procedures through one-stop-shops for the startup of new enterprises. It is equally important to give failed enterprises a second chance by facilitating the closure in time to release captive financial resources for a new job-creating investment.

What about over-taxation?

On both counts, the policies currently pursued are simply wrong and self-defeating. Lawful business and property are being taxed so heavily, it verges on expropriation. At a time when the prime objective should be restoring competitiveness by enhancing the country’s comparative advantages and export orientation, promising business ventures in sectors like Greek organic foods or other agricultural products are burdened with taxes that sometimes reach 85 percent of company profits, often on the basis of “objective criteria” that bear no relation to actual performance. But this destructive tax policy arises from the refusal of the political system to curb wasteful state expenditure at the start of the fiscal adjustment process in 2010. Instead of releasing resources from the public sector, the state has decimated the private sector, pushing thousands of firms to closure or relocation abroad.

What about the fight against tax evasion?

It is not really a fight but a cop-out that results in the incrimination of entrepreneurial activity, without any benefit for the state in terms of even the slightest increase in revenues, the expansion of the tax base or the promotion of market legality. Instead of obliging all traders to issue receipts and submit to regular inspections through a combination of penalties and rewards, the state is forcing consumers to collect masses of receipts, which seldom leads to catching tax evasion. On the other hand, publishing lists of tax debtors with uncollectable liabilities or dramatically arresting and releasing of a handful of alleged tax offenders is useless. These are measures that only serve to terrorise rather than enforce the rule of law and transparency in market transactions. Enterprises must deal with a maze of incoherent regulations and the threat of fines at every step of the way. This ultimately encourages tax evasion as well as corruption and graft. In England, fines are reserved for minor tax offences and only for first-time offenders. The second time means loss of licence and closure. Making the risk of tax evasion more costly than recognition of legitimacy is the key to an effective taxation system.

How can YEAH help young entrepreneurs cope with these drawbacks?

Apart from advising and supporting them with our seminars and official interventions, we are pushing for specific reforms regarding the infrastructure of business activity. Public and EU funds made available to individual projects could be used more productively to create public networks of research and development, investment boards by sector or export marketing services through Greek embassies. Countless public buildings remain vacant when they could be providing subsidised office space for small business startups. There is no shortage of inexpensive and practical ideas we can offer the development ministry or the troika if they are willing to listen and take action.

By Dimitris Yannopoulos
Source: Athens News
Published: January 29th, 2012

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