JUDY WOODRUFF: Next tonight: the economic crisis in Greece.
Air traffic controllers began a work slowdown there today, and are threatening rolling strikes starting Sunday, as they demand more staff and new equipment. The Greek government says it must hold down public spending if it’s to cure the country’s financial ills.
Our economics correspondent, Paul Solman, continues his reporting from Greece tonight with a look at the country’s vast underground economy.
It’s all part of his continuing coverage on Making Sense of financial news.
PAUL SOLMAN: Swimming pools — a private pool in Athens implies a certain level of income, and you’re taxed accordingly. Tax returns in one area reported 324 pools. Yet, when the authorities searched the area on Google Earth, they found 17,000.
A campaign to end the astonishing level of tax fraud in Greece and help correct a huge budget deficit was on. And, says Prime Minister George Papandreou, it’s working.
GEORGE PAPANDREOU, Greek prime minister: Tax evasion is — is going down. We have higher tax revenues even in the first few months after the new tax law which we passed.
PAUL SOLMAN: The new law shifts the Greek tax burden to higher incomes, with stiff penalties on tax evasion.
To journalist Tasos Telloglou, tax reform may be the key to saving the Greek economy.
TASOS TELLOGLOU, journalist: Nobody pays here his real taxes. The richer you are in this country, the less money you pay for tax.
PAUL SOLMAN: You have brought us to this rather desolate spot. Why?
TASOS TELLOGLOU: This is the street of the so-called fun industry. That means the biggest nightclubs of that city are around this street. And here is most of the black money washed.
PAUL SOLMAN: Well, I mean, how much money can you spend at a table at a nightclub like this?
TASOS TELLOGLOU: One famous case was about 8,000 euros. It was a porno star involved and a son of an ex-general-secretary of the governing party.
PAUL SOLMAN: Ex-pols as high-rollers. The porn star, meanwhile, was Julia Alexandratou, a sometimes singer whose 2007 hit, “The Target Is Cash,” helped define the debt-drenched decade.
JULIA ALEXANDRATOU, singer (through translator): The target is cash. That’s what my mama told me. That’s what my daddy told me, too.
PAUL SOLMAN: These days, Julia flacks for a hot new Internet gambling site on the only billboards in use in Athens. They’re otherwise empty, suggesting the fear, if not yet insolvency, of more traditional taxable businesses.
But the Internet is tax-free. And much of the Greek economy was and still is, says economist Manos Matsaganis.
MANOS MATSAGANIS , Athens University of Economics and Business: We have to invent a new of doing things and very fast. Can we do that? I don’t know. The kind of problems we are facing are really 19th century problems that we didn’t resolve at the time. And, you know, they — we are obliged to face these problems now.
PAUL SOLMAN: Like what?
MANOS MATSAGANIS : Corruption, for example. Corruption is huge in the health care system.
PAUL SOLMAN: The government recently accused 57 Athens doctors of tax fraud, and is criminally prosecuting some. But Tasos Telloglou says the problem persists.
TASOS TELLOGLOU: You need to bribe to get in the hospital and get a bed. You need to bribe to get in the operation room. You have to bribe not only the doctor that’s operating you, but the whole team of the doctors, plus the nurses.
PAUL SOLMAN: And, says Telloglou, it isn’t just the medical profession.
TASOS TELLOGLOU: I have a lawyer friend that declares 12,000 euros a year, and he makes 300,000 euros a year. So, every three to five years, a comptroller comes from the finance ministry, and this comptroller gets 5,000 to 10,000, and the case is finished.
PAUL SOLMAN: Everyone bemoans the corruption here, including the avoidance of the VAT, or value-added sales tax, says food writer Diane Kochilas, who moved here from New York 20 years ago.
DIANE KOCHILAS, food writer: Taking your kid, you know, to the orthodontist, you pay over time, OK? You don’t pay all at once. And, at the end of it, you ask for a receipt. And the orthodontist says, I’m sorry, but you should have told me that from the beginning, because the price would have been different.
PAUL SOLMAN: And how much more would it have been?
DIANE KOCHILAS: It would have been 20 percent, whatever the VAT tax was at the time. Plus, his income tax would have been factored into that.
PAUL SOLMAN: No receipt, no record for the government, no VAT or income tax paid.
DIANE KOCHILAS: And you encounter that all the time. You walk into stores and people say, you know, this is, you know, one euro with a receipt. It’s 80 cents without a receipt.
PAUL SOLMAN: Until now, most have gone without. In an economy dominated by the state, 50 percent of GDP, and tourism, 15 percent, the one globally competitive industry has been shipping.
Unfortunately, for the tax-starved Greek economy, most of it is based offshore.
Nicos Vernicos, whose family has run local tugboats for generations, is known to be one of the few shipping magnates who does pay his taxes.
PAUL SOLMAN: You’re a rich man. When we talk to people here, they complain, the rich don’t pay taxes, the rich take their money out of the country, particularly shipping, and it’s, in some sense, if not your fault, you’re, in part, responsible.
NICOS VERNICOS, president, Greek International Chamber of Commerce: The ship owners are paying taxes on a flat fee for the tonnage. The shipping community is bringing money to Greece. Those who do not pay the taxes are not the wealthy or the big companies, are the small merchant, the small people who have made money illegally, through corruption, and they don’t want to declare it, because they cannot prove where they took the money from.
PAUL SOLMAN: The big blame the small — the small, the rich.
NICK SIGRIMIS, businessman/professor: Justice means the big fish must pay.
PAUL SOLMAN: Businessman and Professor Nick Sigrimis is struggling to keep his small firm, which automates greenhouses and fish farms, afloat.
Like so many Greeks, he and his workers are now suffering pay and benefit cuts, income and sales tax hikes. The government has to hook those on top, he insists.
NICK SIGRIMIS: The government has to get the big fish in order to present to the people that we do what we have to do, and we need the people to come along with us in the effort that we do to get out of the crisis.
PAUL SOLMAN: Journalist Telloglou agrees.
TASOS TELLOGLOU: The political justification of the austerity program will come if you catch the big ones.
We have a famous case of a big ship owner not paying taxes for the real estate he bought in Southern Athens. Some days after he was caught by the authority that’s similar to the IRS here, he withdrew from the Greek banks 600 million euros and sent them to banks abroad. So, the government was thinking twice on whether they would prosecute a guy like that.
PAUL SOLMAN: So, the people who tell us that the austerity program is because of money that they themselves didn’t borrow are right?
TASOS TELLOGLOU: We are all sinners, but we didn’t have, all of us, the same sins on our backs.
THEODOROS PANGALOS, Greek deputy prime minister: Somebody stole the money, not us.
PAUL SOLMAN: To the government’s number-two man, however, Theodoros Pangalos, the new Greek myth is to blame the other guy.
THEODOROS PANGALOS: But everybody stole the money. When you manage to get your son or your daughter in the public sector or in a job that wasn’t needed, then you stole the state. When you accepted to have a coffee without the…
PAUL SOLMAN: Tax collection, the sales tax.
THEODOROS PANGALOS: Yes — then you were cheating the fisc. And this goes on for every aspect of our life. But all these taxi drivers were stealing every day small amounts from the state, all of them. And this makes a big, big, big amount of money, all these taxi drivers, every day, all over Greece.
PAUL SOLMAN: All these taxi drivers, all these shipping magnates, all these lawyers and doctors, will they now start paying their share?
TASOS TELLOGLOU: I will tell you a story. My wife is pregnant. She will give birth in October. She went to the doctor, and the doctor asked her for the usual, 50 euros for her to be examined in the state hospital.
Well, we decided not to go to this doctor again, but this was the second doctor with whom we had the same experience. And I wonder on how many we should go until we find somebody that he doesn’t ask for that.
PAUL SOLMAN: Have you found that person yet?
TASOS TELLOGLOU: Not yet.
PAUL SOLMAN: If and when he does, maybe Greece will be on the road to solvency, at long last.