By Vassilis Lazaris
“Poverty gives birth to crafts”. This is an old Greek proverb, which says that the lack of wealth is at the same time the source to create it. What happens though, if “poverty” leads States to “find” wealth, by raising taxes or cutting salaries and pensions in a manner that is – to say the least – unconventional? This is the practice observed in some cases, in Europe’s south, during this time of crisis.
The European Union is a society of different peoples, who share common beliefs and aspirations. The founding rock of the EU lies in the fact that Europe’s States are governed by the rule-of-law. That means that they are States formed by their people, governed by them for their own benefit, through the adoption and application of rules known to and accepted by all citizens.
Franco Frattini, then European Commissioner responsible for Justice, Freedom and Security, started his speech in Vienna in 2007 saying: “We must maintain and develop the European Union as an area of Freedom, Security and Justice. This is a central concern for EU citizens.”
The crisis in Greece
Greece is not a poor State. However, government practices and mismanagement of its finances during the last forty years, took a heavy toll on the Greek people, as the recent crisis soared. Greece’s need to raise money to fulfill its obligations to foreign lenders, lead to the rise of taxes for private citizens and businesses and the cut of salaries and pensions. These in turn resulted in a spiral of recession and rise of unemployment, which found both the Greek Government and people totally unprepared to face them.
The Government resorted to “unusual” practices in order to raise money and deal with the crisis.
“Unusual “ practices – Two examples
We present, here below, two examples of such “unusual” practices, which strike at the foundation of the EU: the rule-of-law.
The first one concerns the general public. The Government decided to raise the price of heating fuel, in order to fight fuel smuggling. In essence, the consumers were “punished” during a time of financial crisis, to pay higher prices for heating, due to the inability of the State to persecute and prosecute smugglers. Why does this strike at the notion of the rule-of-law? Simply because it is a measure that hits the general public, which, however, expects its State to be able to fight effectively criminal behaviors and practices. The State does not understand a simple thing: the smuggler will find another “product” to promote and sell, still in an unlawful manner. And the “product” may be something, that a society governed by the rule-of-law may find to be more sensitive and more important (humans, drugs etc.).
The second example refers to a specific group of workers, who were asked by the Greek State to be re-taxed for an insurance benefit received and taxed again in the not-so-recent past. The group consists of former employees of the Organizing Committee for the Olympic Games of Athens – ATHOC 2004.
In 2004, after the successful conclusion of the Olympic Games, each of 1,653 employees received an amount of money, which was given to them as a means to deal with the effects of unemployment. In order to create the fund, ATHOC 2004 established, a few years earlier, a life insurance group policy and paid the premiums. All relevant taxes were paid to the State, care of the insurance company, according to existing legislation. The insurance company provided each ATHOC 2004 employee with a certificate for tax purposes, stating that their tax liability was exhausted.
Six years later (!) the Greek State informed the former ATHOC 2004 employees that they should submit supplementary income tax return declarations, as the insurance benefit was now considered as employment income (additional 40% tax on the amount of the benefit). This “transformation” was made possible in a manner which could not be challenged at the Courts. The Legal Council of the Hellenic State issued an opinion, which was subsequently accepted by the Ministry of Finance by means of a Ministerial Decree. Both these instruments cannot be judged by the Courts. In addition, the Greek State passed a law (4022/2011), which stipulated that taxpayers, who were asked to submit supplementary tax return forms for obligations prior to 2010, would be subjected to surcharges if they filed their tax returns with reservations. The aim of this provision in the law was to make sure that taxpayers would not have recourse to the Greek Justice system.
To make things worse for the former ATHOC 2004 employees, their treatment by the Tax Services can be characterized as “chaotic”, due to the fact that Tax Service employees interpreted the law (!) and the guidelines issued by the Ministry of Finance at their will!
The question in this story is: how was the rule-of-law respected in this case?
These two examples show in a striking way, how a State can turn against the people, whom it is deemed to serve and protect, no matter whether it considers that its actions are taken for the general benefit of its citizens. Laws exist for a reason. To help people deal with everyday issues, provide assurances for the future and assure citizens that their rights will be served and protected. That is the rule-of-law. That is the foundation of our Union. We – in turn – need to protect it in every possible way we can. And we will.
Vassilis Lazaris is a professional economist, holding an MBA from Warwick Business School and a Bachelor’s degree from Athens Economic University. Vassilis has more than 20 years working experience, both as an entrepreneur and as a business manager for large multinational and Greek companies.