The Greek finance ministry is planning to offer a reduced rate of VAT for consumers who pay with plastic. This will allow the banks to act as tax collectors.
In a desperate effort to collect taxes the Greek government came up with the novel plan of forcing the electricity company to collect the recently introduced property tax. Now it's latest scheme is to use the Greek banks in the role of tax collectors, by encouraging consumers to pay with plastic by offering a small discount on the rate of Value Added Tax (VAT) to those who pay via credit and debit cards.
According toAthens News the current VAT rate of 23 percent would be reduced to 20 percent for plastic purchases, whilst the lower rate of 13 percent would be reduced to 10 percent. The amount of VAT charged on purchases would thus be collected by the credit card issuer and paid to the government. Ekathimerini reported that although the rate of VAT has been hiked twice in the last two years, the amount collected is less than the amount in 2009. Whilst some businesses may not declare the VAT on cash purchases, the startlingly obvious reason for lower VAT revenues is that austerity measures and increased taxes and prices have reduced disposable income. Yet the assumption is that VAT revenues have fallen due to tax evasion.
The simple fact is that Greece is primarily a cash society. Whilst the country fails to manage its finances, personal debt remains low as the credit culture never really took off. Businesses resort to loans but credit card usage is relatively new. Prior to 2003 personal consumer debt was capped at 10,000 euros. Outside major cities it is rare to see Greek consumers pay with credit cards, and cash remains the norm.
Encouraging the use of personal credit during the current Greek debt crisis is a foolhardy notion. It misses the point that existing tax revenues owed from the big businesses and the wealthiest tax evaders are the real issue, coupled with the blatant incompetence and corruption of the existing tax collection system which Digital Journal reported is rife with embezzlement by tax officials.