At Core of Greek Chaos, a Reviled Tax

By CHARLES FORELLE

Greek protests against austerity measures continued Wednesday as firefighters blocked a bus in central Athens to demand employment contracts.

When the Greek government surprised homeowners in September by imposing a new national property tax, the mayor of this down-at-the-heels suburb on the western fringe of Athens sprung into action—mobilizing against it.

Stavros Kasimatis opened his office to poor residents who refused to pay the tax, which had been added to electricity bills in an effort to boost Greece’s woeful rate of revenue collection. Municipal workers told the residents to pay only for power, then helped them fill out legal paperwork asking a judge to prevent the electric company from shutting off the lights.

Mr. Kasimatis brought 1,165 of the petitions to a local district court. In February, he won.

“From the very first moment, we thought that this measure was unconstitutional,” said Mr. Kasimatis, who campaigned with the support of left-leaning parties. “Power, energy, is a social right. They were blackmailing citizens.”

Today, Greece is convulsing ahead of its most critical election in at least a generation. One of the flash points is the new property tax—a window into what has gone wrong with Greece, and with Europe’s plan to rescue it.

For many in the euro zone, Greece’s sluggish tax receipts are a perennial frustration. For many in Greece, however, the new taxes—which fall particularly hard on those lower on the income scale—are only compounding the country’s woes and stifling its economy.

So despised is the property tax that its critics—which is to say, most of Greece—refer to it as the haratsi, after a per capita tax imposed by the occupying Ottomans. About three-quarters of Greece’s households own their homes. Like many other European countries, Greece already has some property taxes. But those have been aimed mostly at higher-value properties and raised little revenue.

The latest tax was born in a hurried effort to plug a €2 billion ($2.5 billion) budget gap last year. The government assessed €2.5 billion in taxes—based on a property’s size, location and age—and included the levies in 12.6 million electric bills issued by the electric utility, Public Power Corp., or PPC.

Money was slow to come in. Eventually Greeks paid €2.1 billion, much of it this year.

But the tax has since run aground. Resistance to the levy caused a rapid spike in overdue bills at the power company. That so aggravated PPC’s cash crunch that the government has let the company hold on to about €260 million of tax revenue it collected in the spring, says George Angelopoulos, PPC’s chief financial officer. That money has to be repaid in June.

Political and legal opposition has threatened the tax , at leastin its current form. No 2012 tax bills have been issued this year. None are likely before the June election. This week, Greece’s high court deemed it unconstitutional to cut off the power of customers who don’t pay the tax, eliminating the government’s main source of leverage. Removing the tax, however, would threaten the strict budget targets that the euro zone has set for Greece.

The tax is a potent draw for the plethora of small parties that have upended the longstanding dominance of Greece’s political stalwarts, the socialist Pasok party and the conservative New Democracy. A Pasok government imposed the tax, and New Democracy—while not friendly to taxes—has broadly supported the euro-zone bailout the measures that come with it.

The antibailout leftist party Syriza, which is vying for the lead in polls, has made resistance a centerpiece of its campaign against austerity. A Syriza official said that the party didn’t pay the property-tax bill for its headquarters building—and that Alexis Tsipras, its upstart leader, didn’t pay at home either.

In Korydallos, locals have sought relief. Velissarios Moros came to the town hall for help with his €450 tax bill. Mr. Moros, 38, an on-again-off-again pizza cook, spent last summer working on the tourist island of Mykonos. He returned to Korydallos in September and had a few odd jobs, he says, but no work since October. As the warm weather approaches, he says he still can’t find work on the islands.

He is living off his dwindling summer savings. “I have one month more,” he says. “After that, I don’t know.”

Up on the edge of Korydallos, where the concrete buildings peter into a hillside carved up by old quarries, Agapi Mandaka is running out of money.

She said she and her husband, an electrician, saved for years to build a block of three apartments for themselves and their adult children. He died seven years ago. Ms. Mandaka lives on a pension of some €900 a month.

The apartment building is unfinished. The stairwell is uncovered concrete. She said she ran out of money before she could install an elevator. The construction loans eat up about two-thirds of her pension. She owes €102 to the grocer and €303 to the water company.

Her property tax bill is €1,045.80. She didn’t pay.

“They are turning to the people and saying, ‘We are going to cut from the money that you worked for,’ ” says her daughter, Sofia, who is unemployed and lives with her. “This house was built by the personal work of this family.”

The tax has soured Ms. Mandaka on politics. For years, she voted faithfully for the socialist party, Pasok. Now she votes Communist—less out of ideology than a desire to punish the political class. “It is Pasok who pushed me down,” she says.

A version of this article appeared May 31, 2012, on page A9 in the U.S. edition of The Wall Street Journal, with the headline: At Core of Greek Chaos, a Reviled Tax.

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