EU: Tax collection still lagging in Greece

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By DEREK GATOPOULOS and RAF CASERT, Associated Press

ATHENS, Greece (AP) — Greece is failing to collect the tax it is owed and is in danger of missing key targets that need to be met to reduce the government's staggering debt pile, the European Union warned on Monday.

An EU task force helping Greece overcome the financial crisis that brought it to the brink of bankruptcy said Athens still has trouble dealing with old, outstanding tax claims. With 2 months to go in 2012, it was still about a billion euros behind the EU target of recovering €2 billion ($2.6 billion).

In a report it said Greece made only 88 audits of large taxpayers, well short of a 2012 target of 300, and 467 of "high-wealth individuals," below a 1,300 target.

Overall, EU Vice President Olli Rehn said Greece was nevertheless tackling problems "with determination and resolve."

Greece has been surviving on rescue loans from its partners in the 17-country eurozone and the International Monetary Fund since 2010.

The creditors agreed just last week to pay out the latest batch of loans after agreeing a series of debt relief measures, such as lowering the interest Greece has to pay on the loans and the completion of a bond buyback scheme.

Ratings agency Moody's warned that Greece's debt remains unsustainable despite those measures.

The continuing drop in Greek economic output, the agency argued, made it "unlikely" the country would be able to control its national debt "without further reduction on principal." That would mean that Greece's existing creditors — mainly other euro governments and the IMF — would have to take a cut on their loans, something they have so far ruled out.

In the short-term, the disbursement of the next batch of loans will keep Greece from going bankrupt and triggering more turmoil in financial markets.

Athens will get a total of €49.1 billion ($64 billion) between now and March, with €34.3 billion paid up front in a transfer that a Greek government official said was completed late Monday. The official only spoke on condition of anonymity, not being authorized to discuss the issue with media.

In return for the money that will see Greece through the winter months, the country had to commit to further austerity measures, including more spending cuts and tax increases that are set to extend a recession that started in late 2008.

With unemployment topping 25 percent, the government on Monday extended a freeze on the repossession of most primary homes through 2013.

Taxation is a particularly tough issue to deal with. "The Greek Tax administration is falling short of targets and is not well placed to meet end-2012 benchmarks," said the quarterly report from the EU task force, which aims to help Greece implement its reforms.

The report did insist that the new government of Conservative Prime Minister Antonis Samaras was strongly committed to an overall reform of the tax system.

Last week, the Greek government proposed legislation for a simplified tax system by which people earning more than €42,000 ($55,000) per year will now be taxed at a new top rate of 42 percent.

For years, Greeks have been complaining about the uncertainty created by an ever-changing tax system, arguing it undermined compliance and revenue.

Tax evasion has long been a major problem in Greece and other countries hit by the financial crisis.

In Spain, where tax fraud is rampant, as much as €90 billion ($115 billion) is lost each year to tax fraud — the equivalent of the country's national debt, according to Spain's main tax inspectors' union.

Tax evasion of all types in Italy every year totals about €240 billion ($300 billion), or 15 percent of the country's gross domestic product of €1.6 trillion ($2 trillion), tax police estimate. The sum amounts to more than a third of Italy's yearly total receipts from tax — €676 billion ($860 billion), according to 2011 figures from Eurostat.

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Casert reported from Brussels.

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