Technology Whiz Kid Tackles Greek Tax Evasion
Greece is pinning its hopes of boosting revenue from an antiquated tax system beset by massive evasion on Harry Theoharis, a boyish-looking 42-year-old who describes himself as an "IT monkey."
With Athens fighting to stave off bankruptcy, the former London-based technology manager for Lehman Brothers is tasked with modernizing what is effectively a 19th century tax bureaucracy and bringing it up to euro zone standards.
"I'm not the type of person who will lock himself up in his tower and not talk to anyone," Theoharis told Reuters. "We must organize services better and cut routine procedures."
Theoharis had long left Lehman Brothers when the U.S. investment bank collapsed in 2008. But this event set off a worldwide crisis which helped the following year to bring down Aspis Pronia, a Greek insurance group where he was chief information officer.
During the crisis Greek tax revenue also collapsed as the economy went into a downward spiral, compounding the long-standing problem of evasion and forcing Athens into an international bailout.
Last month, Theoharis was appointed Secretary General for Public Revenue — a powerful job Athens created at the behest of its European Union and International Monetary Fund lenders. His job is to rid the tax service of political meddling and remove underperforming officials as part of reforms prescribed in the bailout deal keeping Greece afloat.
(Read More: Greece Warns of Going Broke as Tax Proceeds Dry Up)
Previously as chief of the finance ministry's data service, he introduced innovations such online payment of road taxes. An avid user of Twitter — where he described himself as the IT monkey — he tweets taxpayers at one in the morning and yet appears clean-shaven on TV talk shows six hours later.
"The budget and the bailout plan are setting clear targets. Everybody will be measured against them, every quarter," Theoharis said in an interview at his modest office in the finance ministry.
His appointment shows a realization that computerizing the antiquated, paper-based tax administration is the way to cross-check scattered data and help to uncover large-scale tax fraud.
Astonishing Tax Evasion
Greece has so far disappointed its lenders on reforming revenue collection. In a report last month, the International Monetary Fund said the rich and the self-employed were continuing to evade taxes "on an astonishing scale."
Middle-class wage earners and pensioners, the hardest-hit group in Greece's six-year recession, account for 70 percent of total personal income declared, deepening a sense of injustice and resentment against Greece's pro-EU/IMF government.
In 2011, about four in 10 taxpayers declared annual incomes below the poverty line of 6,600 euros ($8,900) for single people or 13,800 euros for four-member families — twice the real poverty rate of 21 percent estimated by the Greek statistics agency.
More than 90 percent of all businesses declare losses or profits below 10,000 euros a month. Even at the height of Greece's debt-fueled economic boom in 2007, a tiny 0.1 percent of firms accounted for more than half of total corporate profit.
Pushed by the EU and the IMF, Greece is to unveil a much-delayed overhaul of the current, corruption-prone system and tax code later this year.
Vassilis Korkidis, chairman of the ESEE union of retailers, wants to be rid of the current system. "Enough with that rag from the 1950s, which is impossibly complicated and just fuels corruption," he said.
The ESEE has suggested a series of hi-tech measures to fight tax evasion, such as connecting shops' cash registers online with the finance ministry, introducing electronic invoicing and digitalizing fuel station pumps to combat smuggling.
A 14-member committee set up by the finance ministry is separately drafting a new tax code with simple accounting and record-keeping rules. These would replace often contradictory tax legislation that has piled up over decades, scaring investors and thwarting business projects.
"You have to consult the tax code to check how to deduct 100 euros for a purchased couch," said Apostolos Refenes, a member of the committee which brings together Theoharis and a deputy finance minister with experts from the government, business and universities.
A summary of the current tax code has swollen to over 2,000 pages, making it impossible even for honest businesses to comply and subjecting them to arbitrary checks by sometimes corrupt tax officials who demand bribes.
(Read More: What's the Solution to Chronic Greek Corruption?)
"We want no more physical contact with tax inspectors," said Korkidis, adding that even small firms needed in-house accountants to deal with the tax code and had to send employees carrying bags full of papers to tax offices to check.
This paper jungle is distracting inspectors from tackling tougher but more lucrative tax cases, such as wealthy lawyers and doctors, where audits are producing revenue far short of targets, the EU and the IMF said in a December report.
Theoharis plans to merge tax offices to pool resources and make the system more efficient. However, other reforms will be harder, such as replacing underperforming tax office bosses who are politically connected or scrapping same-size-fits-all civil service rules to reward inspectors who bring in revenue.
"There will be stiff resistance, both from within the tax administration and the political system," said Diomidis Spinellis, a technology professor at Athens university who was Theoharis's former boss at the finance ministry.
(Read More: Good News Finally Coming for Greek Tax Collectors)
"It will be very difficult to change things," said another official involved in the tax reform talks who declined to be named. "Even if we assume there is political will at all levels of government, people with actual experience on how things could work differently are very thin on the ground."
To make matters worse, public sector wage cuts of up to 30 percent have demoralized Greece's untrained and over-aged tax officials, who must now learn from scratch how to raise taxes instead of blindly following formal procedure. "Many have just stopped working to protest the wage cuts," Korkidis said.
Even Theoharis sounds circumspect, when asked if he thinks he can make full use of his new powers. "It will be difficult, we'll see," he said, shortly before ending the interview to receive the IMF's resident man in Greece, knocking on his office door.