Greece is shock! Permanent & stricter “Capital controls” for Public Servants and Pensioners


Greece is shock! Permanent & stricter “Capital controls” for public servants and pensioners

A shock-measure: civil servants and pensioners will be subject to stricter capital controls than the rest of the Greeks. They will be able to withdraw only €150 per week – with the cash withdrawal cap being €420 per week – that is a total of €600 per month. The rest of their wage or pension they will have to spend by using debit or credit card.

The news fell like a bombshell on Saturday evening and spoiled the weekend of millions of Greeks. It will probably spoil the rest of their lives too.

Greek media revealed, that the Finance Ministry plans to impose such a measure in order to combat tax evasion, but of course, not the tax evasion committed by the civil servants and pensioners as this is not possible as the state deducts their share on tax before they receive wages and pensions but the tax evasion committed by business owners.

According to the Finance Ministry plan, civil servants and pensioners will be able to withdraw in cash only part of their wages and pensions and the rest will have to remain in their bank deposit account. This remaining amount they will have to spend only through the compulsory use of debit or credit card.

“The measure will affect 2.65 million pensioners and 600,000 civil servants,” notes newspaper To Vima that revealed the shocking plan.

The newspaper adds that with this measure, the compulsory use of plastic money, the business owner , whether a shop or a professional like doctor, plumber etc will not be able to evade taxes since all transactions will be recorded in the banking system.

The Finance Ministry reasoning behind this plan is first of all the assumption that the money – or large party of the money – it pays in wages and pensions is been used in real economy without receipt thus without Value Added Tax and tax revenues for the state.

“Every month the State and the pension funds pay for salaries and pensions of approximately €2.6 billion, that is €30 billion per year.  The salary or the pension comes into the bank account of the beneficiary, who can withdraw 420 euro per week due to the capital controls.

This cash money is being used for the purchase of goods or services “and a large percentage of these transactions does not bring revenues to the state as the transactions are being done without the issue of receipt or receipt are issued by so-called fake cash registers which are manipulated to show less revenues.

In this way, the state suffers revenue losses of approximately 15-20 billion euro per year due to not collection of Value Added Tax and income tax,” from businesses and self-employed.

With this measure the state calculates that it will receive in no time revenues from V.A.T. and will not miss a cent from income tax. The state expects to rapidly increase its revenues and “proceeds to future reduction of the tax rates of 8.500,000 taxpayers.”

The Finance Ministry apparently considers to exempt pensioners of over 75 years old from the measure as well as those living in remote areas where the use of plastic money is limited.

If the measure successfully increases the state revenues and does not puts obstacles in the operation of households, “it can be extended also to salaries of the private sector.”

Measure officially not dismissed

The measure is supposed to be implemented next year. Alternate Finance Minister Tryfon Alexiadis, former tax official and now in charge of changes in taxation and taxes in general, did not dismiss the news. Speaking to private Mega TV on Sunday, he stressed that “the intention of the Finance Ministry to extend the use of plastic money, compulsory and voluntary, in order to combat tax evasion and the fact collection of V.A.T.”

In a Sybilla-style oracle, he said that “no capital controls will be imposed on wages” and that “whatever will be decided will not surprise anyone.” He advised Greeks to not fear. He added that “any changes will apply as of 1. January 2016.”

“Economics – the Basics” for 3. school grade

I could comment right away “the measure is a crap“, I am a polite lady and as a blogger I think that I am obliged to write down my arguments.

  1. the measure violates 2 articles of the Constitution.
  2. then it deprives people from accessing their full pension or salary.
  3. and it scraps equality among citizens and taxpayers then it creates two categories of citizens: civil servants & pensioners with incentives and credits, non-civil servants & non-pensioners with less privileges.
  4. it creates two categories of businesses: consumers should prefer super-markets & big companies, while avoid small businesses that will be in competition disadvantage.
  5. it can not secure – and of course not prohibit – that the cash withdraw will not be used to pay doctors, plumbers etc.
  6. it will drive households that pay utility bills (electricity, water, natural gas, telecommunications etc) per “bank monthly order”.
  7. Part of Greek citizens will be able to withdraw €1,680 per month, while part of citizens only €600.

And 8. and most important: it will make consumption compulsory in a country where low pensioners have to cover their basic needs by borrowing money from relatives and friends – to start with. Not to mention what will happen if this measure will apply also in the private sector, where many employees are paid with 2-5 months delay. I could expand my list of arguments with lots of examples form the real life of Greeks in times of recession, austerity and capital controls. But this is the subject of another post.

On the other hand, low pensioners of 300-600 euro per month will still be able to  withdraw the whole amount of their pension only in slower intervals.

A nice hole in the water? Probably. I have no idea who worked out this simplified and generalized plan but I have the suspicion that this ‘official’ has not graduated from high school yet.

Anyway, the plan revelation triggered an outcry and anger not only among the civil servants and pensioners but also among those not affected by it.

Plastic money compulsory for new companies

Another measure is apparently under way in the fight of tax evasion.

“Companies that are founded from next year onward plus a range of sectors of the Greek economy will only be able to accept payment via debit or credit card, according to a plan being drawn up by the government.

The plan, which has yet to receive the final approval from the country’s lenders, foresees all new companies having to be equipped with point of sale (POS) terminals that can accept credit and debit cards. The same will apply to numerous professions like will include doctors, lawyers, electricians and plumbers, which are all professions where tax evasion is thought to be rife.” (full article ekathimerini)

Also in this case, the ambitious legislator will create 2 businesses categories and exclude form competition the new companies as they will not be able to accept cash.

Who wins?

One has also to ask who wins from these measures except the state and the revenues it calculates to receive.

For sure the biggest winner are the banks: first of all, they will keep longer the amounts of pensions and civil servants salaries. It could be 1-1.5 billion euro per month. Secondly, because they charge 2 euro per transaction via debit or credit card.

Next to banks, a new business sector is skyrocketing in Greece: the companies that sell the POS-devices.

One has also to ask whether the state will use this option to deposit with delay salaries and pensions.

PS to make one thing clear: yes, the state should combat the tax evasion and yes, people should or could learn to use plastic money – even though this benefits only the banks. But the state cannot achieve its goals by punishing the consumers. In this troublesome country, they always strike the wrong target.

and furthermore, in order to use debit or credit card one has to have a bank account and money on this account.

So far, we have heard of not a single measure that would bring money to bank accounts.

Click here for Keep Talking Greece original story.

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