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The Second MoU: Externally Imposed Change Despite Domestic Opposition

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Book cover The Depoliticisation of Greece’s Public Revenue Administration

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Abstract

This is the second of the book’s three empirical chapters. It focuses on the content and implementation of the part of the second Memorandum of Understanding (concluded in 2012) that relates to Greece’s public revenue administration. In particular, it examines the introduction of a degree of semi-autonomy in its operation as a problematic halfway house between the status quo ante and subsequent developments discussed in Chap. 5. Emphasis is placed on the ruling (in particular, the governing) élite’s resistance to semi-autonomy leading to the effective dismissal of the first head of the semi-autonomous organisation. It also shows the relevance of external pressure in bringing about semi-autonomy.

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Notes

  1. 1.

    From 15.8% in 2009 to 6.5% in 2011 (Süddeutsche Zeitung 2012).

  2. 2.

    As former Minister of Finance Papaconstantinou noted, the atmosphere was more akin to a Latin American country in the run up to a coup d’état than a European country (Papaconstantinou 2016: 299).

  3. 3.

    Only populist Left SYRIZA , the unreconstructed Communist Party and the small Eurocommunist party DIMAR (Democratic Left) voted against the new government.

  4. 4.

    Another difference was the source of funding. While the first programme was funded (on the EU side) via direct bilateral loans provided by Eurozone member states, the second was funded by the EFSF, which had, in the meantime, been created and funded by the same countries. The IMF contributed to both programmes but the instrument changed from a stand-by arrangement (SBA) to an extended fund facility (EFF) that allowed for a longer repayment period (European Commission 2012b: 5).

  5. 5.

    Some—like the dispute resolution system or obtaining and making better and quicker use of information from the banking system—were technical in nature but others were much more likely to face overt or covert opposition. The former included completing the reassessment and recruitment of 1000 tax auditors with the aim of increasing their total number to 2000, establishing within four months a formal performance review framework involving specific targets against which existing managers’ performance would be assessed, with the specific commitment to ‘replace managers that have underperformed their targets’. Among the latter were personnel-related actions and anti-corruption measures. These included actually setting up the internal affairs department that the previous government had established (see Chap. 3), improving the protection of whistleblowers reporting corruption within the public revenue administration, introducing procedures for the rotation of managers, setting targets for the audit of asset declarations submitted by the revenue administration’s own officials and preparing (by September 2012) a fully fledged anti-corruption plan (European Commission and Hellenic Republic 2012, para. 12).

  6. 6.

    These included (in the course of 2012) allocating more staff to the debt collection directorate, doubling the audit capacity of the large taxpayer unit created under the first MoU, closing around 200 underutilised tax offices (a process that had commenced but stalled under the previous administration) and securing the revenue administration HQ’s greater (and more target-orientated) control over the remaining tax offices. This was in response to the problem of extreme fragmentation that technical assistance teams diagnosed early on (Weinzierl 2015: 453).

  7. 7.

    A secretariat general is the largest unit (equivalent to a division in a British ministerial department) in the internal organisation of a Greek ministerial department and usually covers a broad area of policy or set of tasks.

  8. 8.

    SYRIZA came second by increasing its score from 4.6% to 16.78%. This score could have been higher in the absence of the newly established DIMAR , which got 6.11% and 19 seats. DIMAR split from SYRIZA after the internal battle for the latter’s leadership. On the right of the party system, although ND had in the meantime elected nationalist Antonis Samaras as its leader, the newly established nationalist, populist ANEL (Independent Greeks, a break-away party from ND) got 10.6% of the votes (and 22 seats in the 300-strong Parliament ) and the neo-Nazi Golden Dawn rose from 0.29% to 6.97% and 21 seats in Parliament.

  9. 9.

    Between them they had obtained 42.83% of the vote and 132 out of 300 seats.

  10. 10.

    DIMAR too participated in it, prior to withdrawing from it a year later.

  11. 11.

    The parties that opposed the MoUs and were represented in Parliament had obtained 45.83% of the vote and 121 out of 300 seats in Parliament.

  12. 12.

    This was part of PM Samaras’ strategy. This is why he chose the Berkeley- and Harvard-educated Ghikas Hardouvelis as Stournaras’ replacement when the latter was appointed head of the Bank of Greece , the country’s central bank. Like Stournaras, Hardouvelis is a professor of economics who has worked in banking and has never been a member of Parliament . Hardouvelis has worked as a head of the economics desk in the PM’s office when Costas Simitis was prime minister immediately before and right after Greece’s adoption of the euro.

  13. 13.

    This amounted to a debt reduction of about 107 billion euros (European Commission n.d.-b).

  14. 14.

    Another example is the decision to centralize and focus audit functions, filing enforcement and debt management in a smaller number of larger tax offices, with the remainder of the network of tax offices switching to customer service provision without audit and enforcement roles.

  15. 15.

    The same applied to the aforementioned target of increasing the number of auditors to 2000.

  16. 16.

    Another example indicating that ineffective tax compliance was also linked to the arcane nature of Greece’s tax law is the revised second MoU’s stipulation that, in addition to the simplification of income tax legislation, a new Tax Procedures Code would be enacted by May 2013 (as a structural benchmark ) so as to remove ambiguities and excessive cross-references and make it more accessible to taxpayers .

  17. 17.

    That is the term used by the European Commission too (see, e.g. European Commission 2014: 3).

  18. 18.

    It is also known as ‘omnibus law’ because it incorporates into Greek law a series of policy and other commitments that the then government made so as to obtain the second bailout’s funds. It also involved debt restructuring for the part of government debt that was in private hands (PSI).

  19. 19.

    See Introduction for the key elements of what the IMF and the EU consider good practice. It is important to note that this practice was not confined to the structure of the revenue administration but included process-related tax matters too, such as a draft bill on the reform of the Code of Tax Procedures (see Kathimerini 2013d).

  20. 20.

    This means that this arrangement differs from the one that applies to the heads of independent authorities that are actually mentioned in the Greek Constitution (Koutnatzis 2016: 234).

  21. 21.

    For example, this could happen in case of actions entailing an arrest or imprisonment (Hellenic Parliament 2007, Art. 103).

  22. 22.

    Senior SDOE staff had voiced their support for this measure (Lampropoulos 2012).

  23. 23.

    For example, in 2013, 187 new staff were recruited on the basis of meritocratic procedures but 1296 retired, including 883 tax officials , 175 customs officials and 19 financial inspectors. The following year 834 retired (including 574 tax officials) but only 253 were recruited.

  24. 24.

    These were hitherto parts of GGPS .

  25. 25.

    See also Hellenic Parliament (2013a).

  26. 26.

    See Hellenic Parliament (2014).

  27. 27.

    This kind of function can make a difference when a procurement project has to be carried out quickly. For example, under the first MoU initial steps to merge underutilised tax offices were significantly delayed due to IT problems (see Chap. 3).

  28. 28.

    We would normally adapt this table by deleting the last column (current status and timelines) but we chose against doing so in order to demonstrate the intensity of the conditionality regime under which this reform was promoted (see also Chap. 2).

  29. 29.

    The latter case involved a change in the law to facilitate the rehiring of staff that were found to have been recruited (for partisan gain) illegally just before the 2009 legislative election (Telloglou 2014b).

  30. 30.

    In formal terms Theoharis did not have to resign. In fact, he could have rejected this request but how would he then work with the Finance Minister who had made that request on behalf of the government? This incident illustrates the limits of formal arrangements (see also Chap. 5 on the current institutional set-up) but also the relevance of personalities (interviews, Athens, 4 April and 2 June 2017).

  31. 31.

    The progress was noted by the Commission later in the year, although there was room for further improvement (European Commission 2014: 33). Finance Minister Stournaras publicly acknowledged that Theoharis had ‘systematically exceeded the targets set’, in the press release issued on the occasion of Theoharis’ departure (see Naftemporiki 2014).

  32. 32.

    It also led to a rise in the cost of borrowing. His circular in question was subsequently withdrawn (Dimitrelis 2014; Kathimerini 2014b).

  33. 33.

    This task was undermined by the fact that Greece, a member of the Eurozone since 2001, still does not have a complete land register. It is meant to be completed by the early 2020s.

  34. 34.

    Even after the European elections, PM Samaras spoke of ‘errors in the public revenue mechanism that must be corrected’ (Naftemporiki 2014).

  35. 35.

    Theoharis himself pointed out that his job was to carry out legislation enacted by others (Kathimerini 2014d).

  36. 36.

    This is significant if one considers the differences between that institution and the IMF (see also Chap. 5). As was rightly noted at a meeting held in London in January 2018 under the Chatham House rule, ‘The IMF is here for three years and then gone. For [the EU, Greece is] part of the family’.

  37. 37.

    Staff union officials went as far as to accuse the IMF of favouring the collection of taxes by private firms in Greece (ASKI Eforiakon 2013; POE-DOY 2013a). This accusation relates to the IMF’s aforementioned point about the possibility of ‘switching to a revenue agency outside the remit of the civil service’ (IMF 2013: 22). On the other hand, a former ministerial adviser noted that he felt that an independent agency was the IMF’s preferred model all along and ‘from the beginning there was an effort to find one pretext or another so as to end up where we finally ended up’ (interview, Athens, 4 April, 2017).

  38. 38.

    In the short intervening period (a) the law was amended so as to enable the government to appoint a senior SGPR official as interim secretary general and (b) an interim secretary general was appointed accordingly (Hellenic Government 2014; Minister of Finance 2014a).

  39. 39.

    Indeed, one can argue that this is a classic case of a poacher who has turned into a gamekeeper. Her predecessor subsequently stated that she had repeatedly acted as representative of various companies while he was head of the SGPR (Zafiropoulos 2015).

  40. 40.

    When the long list of the top ten candidates was created, a report in the Greek media noted that a delay was caused by an unnamed strong candidate’s close links to the country’s political system (Pappous 2014).

  41. 41.

    For example, the VAT gap is estimated to have dropped to 26.68% in 2014 from the pick of 33.04% in the previous year but it still remained one of the highest in the EU (CASE and IEB 2018: 80).

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Authors and Affiliations

  1. Department of Politics, Birkbeck, University of London, London, UK

    Dionyssis Dimitrakopoulos

  2. Department of International, European and Area Studies, Panteion University of Social and Political Sciences, Athens, Greece

    Argyris Passas

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  1. Dionyssis Dimitrakopoulos
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Dimitrakopoulos, D., Passas, A. (2020). The Second MoU: Externally Imposed Change Despite Domestic Opposition. In: The Depoliticisation of Greece’s Public Revenue Administration. Springer, Cham. https://doi.org/10.1007/978-3-030-23213-9_4

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