OECD Warns that Greek Tax Woes Could Be Enduring

Greece remains in a precarious financial situation years after the global economic recession rocked its economy. As a result, Greece is currently working to obtain an additional two billion euro bailout to help keep its government and public services running. However, the Organization for Economic Cooperation and Development (OECD) has warned that without making systemic changes to the nation’s tax collection efforts, these funds could be lost and leave the nation without the means to repay.

Greece remains in a precarious financial situation years after the global economic recession rocked its economy. As a result, Greece is currently working to obtain an additional two billion euro bailout to help keep its government and public services running. However, the Organization for Economic Cooperation and Development (OECD) has warned that without making systemic changes to the nation’s tax collection efforts, these funds could be lost and leave the nation without the means to repay.

Greece has been working frantically all weekend to get its creditors to release the latest round of funds before Eurozone finance ministers meet this week. However, according to the Telegraph, Greek Finance Ministry officials may have failed to convince lenders to make this additional disbursement for at least another week.

While creditor nations around the world have been generally positive about Greece’s overall progress in implementing various economic reforms, the struggling European nation still has a long way to go. As the OECD pointed out, one of the biggest problems for Greece is widespread tax evasion. Pascal Saint-Amans, Director of Tax Policy at the OECD noted that, “The challenges in Greece are so big … It’s about the complete lack of compliance, it’s about a very weak tax administration, and it’s about the fact that paying taxes remains something that people don’t want to do because they don’t see how the money is spent.”

Saint-Amans noted that the Greek government would not be able to succeed in its tax collection efforts without a complete overhaul of its public spending policies. “Very often, as tax people, we lose sight of the fact that tax is just a means to fund a society. The reforms must take both into account.”

The OECD has ranked Greece as the worst among developed nations at collecting tax and social security receipts. Millions work in Greece’s “shadow economy” evading taxes. Unfortunately, for Greece, efficient tax collection is key to many bailout monitors’ list of required reforms that the nation must meet before it will receive additional funds.

Should Greece fail to obtain additional bail out funds this week, it could also hamper its efforts to get its banking system back on track. Recently, supervisors at the European Central Bank found a 14.4 billion euro gap in Greece’s major lenders. Analysts estimate private bank investors will have to cover about 4.4 billion euros in shortfall this year.