The new tax legislation and Poul Thomsen
The changes to the taxation of the self-employed and freelancers proposed by the Finance Ministry brought to mind a discussion I had in 2012 in Washington with Poul Thomsen, the then head of the International Monetary Fund’s mission for Greece and later the Fund’s director for Europe.
Antonis Samaras had just been elected prime minister. When I told Thomsen that Greek governments are trying to implement the required reforms but “some of the measures you are asking of them are not easy to implement and others seem too harsh,” he replied that he and the IMF staff monitoring Greece had become well acquainted with Greek realities, knew the people making the decisions and, more importantly, could detect what they were really willing to do. In the same spirit he added that one thing people from the Fund focused on was whether Greek premiers and responsible ministers would dare clash with their own voter bases. That is where “their seriousness and reliability is judged,” he said.
In the same discussion, he mentioned the reductions in pensions that had been initiated by the government of Socialist George Papandreou, a measure with significant political cost for him and his party as it affected a category of citizens that was considered a privileged audience of PASOK.
He wondered if Samaras would do the same with the lawyers, doctors, and the self-employed who, by general admission, are close to, and by and large vote for New Democracy.
Fast-forward more than 10 years later; the current government is moving ahead with a measure that focuses on a segment of the population that mostly votes for the ruling conservatives.
This is a first test, not only for the prime minister and the finance minister, but also for the entire cabinet, which is called upon to demonstrate by actions whether in its second four-year term it will choose to take advantage of the enormous distance that separates it from the fragmented center-left, in order to implement some difficult and unpopular policies.
In this light, another, or rather a parallel, goal should be for the Independent Authority of Public Revenue (which is an example of a non-partisan selection of competent civil servants who have produced tangible results) to take the necessary actions that would make the presumptive method irrelevant; through innovation and automation to capture the reality of a taxpayer’s revenues, and by doing so to turn the new tax bill into a temporary “necessary evil.”
