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TAX NEWS - June 2010

Greek Tax: Greek Minister Sacked for Husband's Tax Dodging

ATHENS, Greece (May 18) -- There are many reasons why Greece is stuck in such a financial mess. One of them rose into lurid high relief in recent days: wide-scale, and until now largely unpunished, tax dodging.

Like soccer and corruption, tax evasion is a national sport here. But this week, as the country's beleaguered government acted to get Greece's financial house in order, Prime Minister George Papandreou sacked his deputy tourism minister after reports that her husband -- one of the nation's most idolized love song singers and a former film star -- owed more than $6.2 million in back taxes and fines.

Angela Gerekou, a glamorous film star turned politician, stepped down from her post on Monday, hours after Eleftherotypia, an Athens daily, broke the scandal, saying she was quitting her job "out of sensitivity and sensibility" and to "avoid causing any damage to the government," according to a government spokesman.

The revelation marked the biggest embarrassment yet for a government trying to placate a public angry over austerity measures imposed to stave off the country's bankruptcy. Worst yet, the scandal trumped the arrival of Greece's first slice of a $136.5 billion rescue package -- just in time to meet an estimated $11.7 billion debt redemption that rolls over Wednesday.

The bailout loan, patched together last month by the European Union and the International Monetary Fund, was agreed to after Greece's eurozone partners insisted that Athens first cut salaries and pensions, raise sales taxes and unleash a sweeping crackdown on tax evasion.

Gerekou, 51, a busty brunette who worked as a film star and posed for the Greek edition of Playboy before venturing into politics in 2004, has denied any criminal wrongdoing, suggesting that her husband's debts were accumulated before she met, married and began filing joint declarations with Tolis Voskopoulos.

A popular singer and famous Greek actor who shot to fame in the 1970s and 80s, Voskopoulos faces criminal prosecution for dodging taxation for almost two decades, according to a finance ministry statement. It said that the case had not yet come to court, but that Voskopoulos' real estate assets had been frozen.

Initially, government spokesman George Petalotis billed the expose a "private matter." But fearing public backlash, an urgent ministerial probe was ordered, and Gerekou was briskly banished from the government.

For some pundits, the scandal had all the earmarks of a populist publicity stunt intended to quell public fury over the austerity measures. Even so, Greece's culture of tax and debt deception has come to haunt the nation once more.

For decades, thousands of affluent Greeks have treated the income tax as more of a suggestion than a legal obligation. Athens, a chronic violator of European Union budget rules, has had to admit twice in the past five years alone to fudging its finances, understating its debt and attempting to mask its yawning deficit, currently hovering at over 13.6 percent of gross domestic product.

That kind of wholesale lying -- by one of Greece's most popular singers and movie stars, no less -- underscores the staggering breadth of tax dodging entrenched in Greek society for generations.

If the government is to succeed in sorting out Greece's financial malaise, the Athens daily TA Nea wrote today, "it has no room to fail, and thus must act rapidly to wipe out such aging practices."

Scrambling to rake in added revenues for the country's cash-strapped coffers, Papandreou and his government have declared war on tax dodgers, going after cheats like never before. Various studies, including one by the National Bank of Greece, estimate that the government may be losing as much as $24 billion a year to tax evasion. Add on an additional $20 billion in annual losses from corruption, and that alone could help ease Greece's debt problems.

Some of the most brazen tax offenders are the self-employed, a huge pool of professionals that includes taxi drivers and plumbers as well as lawyers and doctors.

Last week, finance ministry officials named and shamed 60 of 151 doctors practicing in the posh Athens district of Kolonaki. All 60 underreported their incomes, with 34 of them claiming less than the taxation threshold of $16,000. One doctor declared annual earnings of $372.

Only 12,000 Greeks declare an income of more than $124,000.

Pundits predicted the Gerekou affair would precipitate a cabinet reshuffle but a senior aide contacted today said Papandreou had "ruled out any such plan."
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