Lessons from Portugal

A recent story about the Independent Authority for Public Revenue getting ready to connect some 500,000 business cash registers to the tax collection system came as something of a shock. Hasn’t that happened already? We’ve been hearing about it for decades, after all. 

Then I remembered the deputy finance minister of Portugal telling me at the start of the austerity crisis that his country had dealt with the bane of tax evasion by connecting all of its tills to the Finance Ministry and issuing every taxpayer with a tax card.

This card, he explained, contains the holder’s ID details and their tax and social security numbers, and is recognized by every cash register in Portugal. It automatically credits the VAT to the Finance Ministry and records the taxpayer’s transactions. Every so often, these receipts are put to a raffle and impressive prizes – such as a car, for example – are given to random taxpayers, encouraging the people of Portugal to demand receipts and making it harder for professionals who usually conduct their business in cash to evade taxes. The scheme led to additional revenues of around 7 billion euros a year.

Of this entire scheme, Greece only adopted the raffle. It did nothing to crack down on businesses and freelancers that still haven’t connected their cash registers to the central system and still refuse to be paid in anything but cash. Why? “Are you nuts?” a former prime minister once said to me when I asked. “You want me to punish my voters, especially now that they’re having such a hard time?” But it’s 7 billion euros – double what the state collects in property tax.

This is not the only area where Greece fails and Portugal succeeds, however. Last week, Kathimerini ran an interview with Portugal’s civil defense minister in which he explained the measures adopted after the devastating 2017 fires that claimed 117 lives and destroyed hundreds of thousands of hectares of land. They created a special organization that was tasked with designing a fire prevention mechanism, with bipartisan support, and managed, within two years, to reduce fires by 65% and land destruction by 66%, compared with 2008-17.

It goes back further too. When Portugal signed its first bailout agreement in 2011, its three biggest parties agreed to support the measures to the last letter, even though they were incredibly harsh and unfair. No one tried to score points by promising to abolish the memorandum and write off the country’s debts with a single law. This is why Portugal was under strict supervision for just three years, against Greece’s 10. And since coming out of its last memorandum in 2014, it has seen its economy grow, unemployment drop and investments and exports rise. A culture of consent – an unfamiliar notion in Greece’s political history – can indeed work wonders.