Greek Banks to Tax Cash Withdrawals to Prevent Tax Fraud

Greek houses by the sea

According to a report, Greek banks have an elaborate plan to combat tax evasion, reduce the use of cash in the economy, and strengthen the electronic system of transactions.

Under the new plan, a special tax would be applied to cash withdraws. The banks argue that criminals can easily channel cash in the black economy. So, bankers believe a special tax on any transaction would lower dramatically cash transactions and prevent large scale tax fraud.

Hellenic banks made a case for a cash-less economy as they envision a future in which credit and debit cards, smartphones and other similar technologies will replace cash. Residents could use these technologies to pay  for public transit and even buy a magazine from a kiosk.

Other Propositions

The banks’ proposal to the Greek government include other propositions. They want mandatory use of electronic payment methods such as cards in venues with a high risk of tax evasion. Banks mention, kiosks, street vendors, bakeries, and even chestnut sellers. In Greece, chestnut sellers can be found at nearly every street corner selling healthy snacks to passers-by.

Bankers also want the mandatory use of electronic payment methods or cards when the transaction exceeds a certain amount. The measure is already in effect in Greece. What’s more, banks want the state to revamp the tax system and replace it with a revenue-expenditure system.

Under the new tax system, individuals and professionals will have to pay taxes depending on the amount of cash not spent. Banks argue that taxpayers will be encouraged to request receipts for every transaction since a larger expenditure means smaller tax amounts.

Additionally on the list there’s the requirement from banks that all business owners access electronic payment networks when they pay salaries and wages.

Critics of the measures blasted banks for their revolutionary idea to create a cash-less world where households use revenue-expenditure books. They also noted 30 percent of the country’s population lives at or below the poverty line.

Critics Not Sure Who Would Benefit from Tax Reform

In addition, the Greek welfare system is on free fall and thousands of households either live from paycheck to paycheck or ask their friends or relatives for help to buy some food, drugs, or pay their bills. So, it is unclear whom this system may benefit, critics say.

And there is also a problem with the elderly population. Millions of seniors above 60 years of age either struggle with modern technology or cannot even use a smartphone. Experts are also worried a special tax on cash withdrawals could hand the control of the capital in the hands of a select few with discretionary powers.

It is not the first time Greece weighs in on taxing cash withdrawals. In May 2015, it sought to pass a surcharge for all cashpoint withdrawals. At the time, the move was a desperate bid from the Hellenic government to keep population’s money in banks.

Greek lawmakers hoped the surcharge would have brought €180 million which the government hoped to use to fend off defaulting on international debts. Last year, millions of Greeks pulled their savings from bank accounts amid widespread panic of state bankruptcy. Population had withdrawn €28 billion from banks in just a few months. To stem the tide, regulators sought a surcharge of €1 for every €1,000.

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