Greece Must Tackle Rampant Tax Evasion: IMF

Debt-laden Greece has made tremendous progress to improve its finances but must do more to fight its “notorious” tax evasion if the country is to remain on course to reduce its budget deficit, the International Monetary Fund said on Monday.

Debt-laden Greece has made tremendous progress to improve its finances but must do more to fight its “notorious” tax evasion if the country is to remain on course to reduce its budget deficit, the International Monetary Fund said on Monday.

Greece has not done enough to tackle the country’s “notorious tax evasion” with the rich and self-employed “simply not paying their fair share”, leaving those on salaries and pensions with the biggest austerity burden, according to the International Monetary Fund’s latest assessment of Athens’ economic reforms.

“Very little progress has been made in tackling Greece’s notorious tax evasion,” the IMF said. “The rich and self-employed are simply not paying their fair share, which has forced an excessive reliance on across-the-board expenditure cuts and higher taxes on those earning a salary or a pension.”

Middle-class wage earners and pensioners, the hardest-hit group in Greece’s six-year recession, account for 70 percent of total personal income declared.

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The Fund, one of the key contributors to the 240 billion euros Greek bailout, also called on Athens to get over its “taboo against dismissals” in the overstaffed public sector.

“While the rebalancing of the economy has been associated with a surge in unemployment in the private sector, not least among the young, the overstaffed public sector has been spared, because of [a] taboo against dismissals,” the report said.

Last month, the Greek parliament passed a bill to allow the dismissal of 15,000 public-sector jobs. But under Greece’s current bailout plan agreed in November, Athens has to cut about 20 percent of its public sector – or 150,000 jobs – between 2010 and 2015 to help reduce spending.

Compulsory redundancies are a sensitive issue in Greece where unemployment is now at a record high of 27 percent and the economy 20 percent smaller than it was in 2008.

However, the IMF said Greece has made “exceptional” improvements on reducing its budget deficit, its competitiveness and preserving stability in the financial sector.

“The achievements to date are evidence of a very strong and persistent determination on the part of Greece and its European partners to do whatever it takes to restore Greece to a sustainable situation inside the euro area,” said the Washington-based Fund. But restoring growth to the country is “the overarching precondition of whether Greece succeeds”, according to the IMF.

While Greece will need to find more savings through to 2016 to reach a targeted primary surplus of 4.5 percent of gross domestic product, the IMF said there is “no room” for higher taxes or spending cuts.

Last week, a European Union report forecast that Greece would end six years of recession in 2014 with growth of 0.6 percent, in line with an earlier forecast by the IMF.

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