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Greece's economic woes get more taxing

A crackdown on widespread tax evasion stirs up a revolt in an island town and discontent elsewhere.

September 22, 2012|By Anthee Carassava, Los Angeles Times
  • Greek tax bureau employees protest outside the Ministry of Finance in Athens this month.
Greek tax bureau employees protest outside the Ministry of Finance in Athens… (Alikis Konstantinidis…)

HYDRA, Greece — With its whitewashed walls and brightly blooming bougainvillea, Hydra hardly conjures up scenes of confrontation, and certainly not the revolutionary spirit of the Boston Tea Party.

Yet not too long ago, a spontaneous exercise of civil disobedience reminiscent of that by enraged Bostonians, ripped through the harbor of this jagged Greek island, laying claim to anti-tax and libertarian principles and awakening a recession-weary public to an autumn of anger.

In late August, a team of newly recruited tax marshals — three men and two women — moved to arrest the 54-year-old owner of Hydra's iconic tavern Psaropoula.

At the time of their inspection, about 10 tables being served lacked receipts for platters of grilled octopus, salads and tzatziki dip, the officials said. The owner, Toula Mavromati, was told she would be arrested and sent to a same-day trial on charges of tax evasion.

"My blood pressure shot up," Mavromati recalled. "The customers were still eating. There was no way the bill could have been tallied yet. 'Enough!' I told them. I had just paid 5,985 euros in sales tax the previous month.

"I wasn't about to be brought in for some mezes and tzatziki," she said. "I resisted arrest, refused the charges and then, overwhelmed by what was happening, I collapsed."

As word of the incident spread, hundreds of Hydra's 1,500 residents swarmed the harbor to protest. Some hurled water bottles and projectiles; other hissed at the tax inspectors.

Eventually, clusters of the crowd broke off, marching in two directions. Women flocked to support Mavromati, who had been hospitalized under police surveillance. And a mob made up mainly of fishermen launched an assault on police who had taken Mavromati's younger son, Elias, 27, into custody in place of his mother because he works as the restaurant's manager.

Pandemonium ensued. Grainy clips of the confrontation went viral on the Internet.

By nightfall, residents had cut off water and electrical supplies at the police station. Reinforcements of riot police were called in the next morning to crush the budding revolt.

The new police officers "lined up along the promenade, and many of them were laughing," fisherman Nikolas Tripos recalled. "They themselves could not believe the size and scope of the [protest] — all for a plate of tzatziki when bigger fish, big-time tax offenders, are at large."

By noon, a coast guard frigate had arrived to whisk Elias Mavromati and the tax marshals to the mainland, where a judge within minutes threw out all charges, ruling that the young man had been wrongly arrested.

Since then, pundits, politicians and the people have continued to debate the outburst of civil disobedience, reflecting palpable nervousness that lingers in Hydra and the rest of the crisis-weary nation.

The tax evasion charges were "a brazen and humiliating attack that struck at the very heart of human dignity, social injustice and our civil liberties," shopkeeper Sophia Sorra said.

Next door, George Rendoulas, a 77-year-old pensioner, nodded in agreement. Echoing much of the nation's sentiment, he unleashed a tirade against the country's "corrupt political elite" and a nation "bleeding out from oppressive taxation."

Hydra, he said, is "the turning point."

Perhaps. With the government unveiling an additional $14 billion in budget cuts in the coming weeks, authorities fear that more such revolts could fuel greater swells of public anger. Many remember that less than a week after the Hydra rebellion, pensioners facing a fourth wave of cuts stormed the office of the country's health minister.

Days later, thousands of protesting police gathered in unprecedented shows of force outside the Parliament building. Last week, teachers, pharmacists, doctors, judicial officials and transport workers set off a string of wildcat strikes, demanding that the government stop considering cuts that they say are unjust.

For the government in Athens, the Hydra showdown offered more than a hint of potential unrest amid added austerity. It also provided a cautionary tale of the difficulty the state faces in cracking down on tax evasion, Greece's favorite national pastime.

With the economy losing as much as $58 billion a year in undeclared income, the administration has made tax collection a priority. But so did previous governments, which failed miserably at the task.

Since fighting his way to power after two highly divisive elections in May and June, Prime Minister Antonis Samaras has moved to placate public anger and claims of social injustice by sanctioning stings against high-profile tax cheaters, including tycoons, rock stars and politicians. Scores of Swiss bank accounts are now on the tax auditors' radar.

Tax revenue has increased 24.2%, according to the Finance Ministry.

But analysts say a decision to lower the tax-free threshold and increase the sales tax to a whopping 23% has resulted in 60% Greeks who work in the private sector reporting less income. Greece's 33,600 restaurateurs, for example, declared average earnings of barely $7,800. And the country's 31,000 bars, among the most lucrative businesses in the sun-kissed nation, recorded average profits of just $5,200.

Faced with the findings, the government is moving to scrap the tax-free threshold altogether and send more tax marshals to the streets for inspections.

Since the August incident in Hydra, new teams of tax inspectors have revisited the island.

"They didn't catch anyone," shopkeeper Sorra said with a glimmer of satisfaction.

But "the message is out," she said. "It is: Watch out, we'll be back. And we're on to you, all of you."

Carassava is a special correspondent.

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