Earlier this year, Greece teetered on the brink of financial ruin. Unable to pay its debts, the country went begging to the Eurozone for another chance. Despite reservations from its colleagues, including an increasingly weary Chancellor Merkel in Germany, Greece was given that chance. This time, however, the deal came with strings – including stepping up efforts to collect taxes and curb tax evasion.
Even as Greece hashed out an agreement with its creditors, there were whispers that something wasn’t right. The firing of Katerina Savvaidou, Secretary General for Public Revenue, the agency responsible for Tax Administration of Greece, seems to confirm that Greece’s tax problem isn’t getting better any time soon.
(You can read more about Greece’s financial and tax challenges here.)
The European Commission, which represents the interests of the European Union, is responsible for monitoring Greece’s bailout. The Commission had no public comment after Savvaidou’s firing but you can bet that the Commission is keeping a close eye on Greece’s most recent political and financial moves.
Greece’s official reason for Savvaidou’s dismissal was a failure to aggressively collect taxes. But the actual reasons are bit more complex. She has been accused of doling out special favors for certain corporate taxpayers.
By trade, Savvaidou is a tax lawyer. According to her LinkedIn profile, Savvaidou graduated from Kapodistrian University of Athens’ School of Legal Sciences before earning two Master’s Degrees from the University of Paris. Her thesis, The compulsory collection of taxes in French and Greek law, also earned her a Ph.D. She researched corporate taxation at Kapodistrian University’s School of Legal Sciences and studied “Comparative Tax Policy and Administration” from Harvard University’s John F. Kennedy School of Government. Her background made her more than qualified, it appeared, to lead Greece’s tax charge after her appointment in June 2014 by the prior government.
However, Savvaidou hasn’t always seen eye to eye with the current Prime Minister of Greece, Alexis Tsipras. Tsipras’ leftist party, Syriza, won over 35% of the vote in the hastily called September election. Prior to the Syriza election, a coalition controlled government, the New Democracy Panhellenic Socialist Movement (ND-PASOK), appointed Savvaidou after that government fired Haris Theocharis (he claims he resigned).
Theocharis had been accused of failing to do what he had called an “impossible job.” Greece has long had a problem with tax collections and over the period where Greece was supposed to be getting better about collecting, they actually got worse. The collective Greek tax gap is now about €76 billion ($86 billion US). The government had claimed earlier that cracking down on collections won’t help: so many taxpayers claim insolvency that only about 12% (or €9 billion, $10 billion US) of those tax bills are considered collectible. For purposes of scale, the amount owed by Greece as a result of the bailout is about €239 billion ($264 billion US).
Beyond collectibility, there’s a bigger concern: tax evasion. The IMF reported in 2013 that available data suggested “a high level of tax evasion and avoidance” in Greece. And while a lackluster economy and a government unwilling to change things could have something to do with it, there might be a much more difficult problem: culture. Nobody likes to pay taxes but “Greeks consider taxes as theft,” said Aristides Hatzis, an associate professor of law and economics at the University of Athens. Paying your taxes, he says, is simply “not accepted by the Greek mentality.”
That mentality was exactly what Savvaidou was supposed to help turn around but her critics say that she did exactly the opposite. She was fired after she was accused of granting Greek television stations an additional year to pay tax on advertising revenue, a move that she called standard practice. Tsipras’ government disagreed, calling it special treatment. Under a law passed in 2010, taxes based on advertising revenue are to be paid each month.
It wasn’t the only issue that the new government had with Savvaidou: she is also under a judicial investigation for calling a review of a €78m ($86.16 million) fine imposed on a Greek tech company.
Savvaidou had been asked to resign but she declined, saying:
I will not allow any resignation on my part to be considered a tacit acknowledgment on my part of involvement in any scandal, nor turn the independent Public Revenues Authority into an intimidated tax administration which cannot carry out its duties.
With that, the government simply fired Savvaidou but not by telling her directly. She found out she had been fired, she claims, when “I heard about it on television.”
