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European CommissionThe Second Economic Adjustment Programme for Greece. Fourth Reviewpayments, the authorities are issuing decisions to match data from various sources and automateoffsetting of VAT and income tax refunds against debts towards the Social Security Funds (see alsoBox 5).Graph 17. Tax administration new debt in 2013and collection of 2013 debt (million EURs)Graph 18. Tax administration collection of debt(million EURs)13,1783,2299,2781,3771,0991,6881,5181,9001,3771,6882012 2013New debtCollection new debtSource: Public revenue administration.2012 2013 Targets 2013*Collection new debt Collection old debtNote: Target new debt was 24.5 % of new debt. EUR 13.178 billion of debt was added to thebooks in 2013 | Source: Public revenue administration.Box 8. The 2013 instalment schemes for tax and social security debtThe authorities introduced in July 2013 new instalment schemes to help payment of tax and social security debt. A"basic scheme" with a 12-month duration was designed to become the normal way of repaying tax or social security debt.Furthermore, in light of the difficult liquidity conditions and significant debt burden of tax payers, a special last-chancescheme, called the "Fresh start" scheme, was put in place to allow debtors to repay their "old" debt (2012 debt and before) ininstalments until June 2017. The creation of similar schemes in tax- and social security administration should prevent debtorsfrom "shopping" around for the most generous schemes. In order to avoid undermining payment of current taxes andcontribution, debtors had to be current on their tax- or social security payments from the beginning of 2013 to enter the"Fresh start" scheme. Furthermore, the "Fresh start" scheme offered incentives when debtors paid their debt upfront.Participation in the new schemes has fallen far short of initial expectations. After 6 month, the results appear better forthe tax administration than for the social security main funds. As of January 2014, EUR 1.2 billion of tax debt had beenenrolled in the "Fresh start" scheme, while only EUR 0.5 billion of SSC debt is included in the new scheme. However, this issignificantly lower than EUR 5 billion and EUR 4 billion for tax and SSC debt, which were assumed to be enrolled at thestart of the instalment programme, respectively. Total payments of tax and social security debt under the "Fresh start" schemeamounted to respectively EUR 130 million and EUR 77 million in 2013, while they amounted to EUR 104 and 58 million forthe "basic" scheme, respectively.In light of the weak enrolment, the authorities proposed to revise the terms of the schemes. They pointed to difficultiesfor debtors to stay current on their 2013 tax and social security payments and hence failed to qualify for the "Fresh start"scheme. The authorities also claimed that the new schemes were not attractive enough, either in terms of duration or in thereduction of past surcharges. The authorities put forward several proposals designed to make the revised schemes moreattractive, either by lengthening the schemes, or by allowing fresh debt from 2013 onwards to enter the "Fresh start" (long)scheme rather than the "basic scheme". The proposal also included bigger reduction of past surcharges.The mission argued against changing the terms of the schemes. First, the eligible debt was probably overestimated in thefirst place given that a large part of the debt is uncollectable in the absence of effective write-off procedures. Second, makingthe terms better for those who had not yet enrolled would be unfair to debtors already in the schemes. Third, prolongingrepayment period would reduce collection in the short-term and increase repayment risks in the medium-term. Fourth, thereal issue was not attractiveness of the schemes but the limited credibility of the threat of enforced collection. Finally, andmost importantly, changing the terms of the schemes after less than one year would undermine credibility and hence theefforts to change the payment culture away from relying on generous debt settlement schemes. The mission also pointed outthat a key issue was to make sure that debtors, who enter the schemes, keep up their commitment and do not drop out, as wasvery common in former schemes.34
Chart 16 Graph 8.1. Enrolment of tax and social security debt into the fresh start and basic schemes3. Programme implementation14001200Chart 8.1: Enrolment of tax and socialsecurity debt into the fresh start and basicschemesmn EURs10008006004002000Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14Tax Fresh StartSSC Fresh StartTax Basic SchemeSSC Basic SchemeData for social security only comprise IKA fund | Source: Ministry of Laborand Tax Administration.3.2.4. Anti-Corruption Strategy50. With the support of the newly appointed national anti-corruption coordinator, the authoritiesprogressed well on anti-corruption actions in 2013 but are facing delays recently. During thesecond half of 2013, due to the impulse given by the newly appointed national coordinator, theauthorities recovered previously incurred delays on the implementation of the National Plan againstcorruption, with key foreseen actions initiated or achieved. The draft law on improvement of the anticorruptionframework, to bring it in line with international standards, was finalized by the end of 2013but only voted in April 2014 after becoming a prior action for the Review. Finally, while the Nationalcoordinator has contributed to the progress achieved, there is need of support from government andrelevant stakeholders in order to move the agenda forward effectively. Against this background, theauthorities committed to submit legislation to parliament for adoption, by end-June 2014, on thefunding of political parties, and providing for an enhanced system of published declaration of assets,interests, and incompatibilities by public and elected officials, as well as members of government, withindependent risk-based audits.3.2.5. Public Financial Management Reform51. Since the inception of the adjustment programme Greece has made significant progress in PublicFinancial Management (PFM) reforms (see Box 9). Commitment registries have now beenestablished in all general government sub-sectors covering 93 per cent of entities 5 and reporting on thee-portal. Line ministries have now completed the reorganization of their General Directorates ofFinancial Services (GDFS) embedded in each line ministries, which are responsible for sound fiscalmanagement. This setting allows provision of timely and accurate budgetary information, assures strictcompliance with the ceilings of the entity’s budget, and ensures the management and optimal utilisationof each entity’s resources. This organization has been intentionally designed to distribute responsibilitydiffusely. In this setting GAO Budget Directorate plays a role in supporting the GDFS through trainingand by providing mandatory manuals, instructions and circulars to improve the quality of reporting.Experience over the last three years has shown that an effective working relationship between theGDFS units and GAO Budget Directorate has been established.52. Despite these significant achievements, GAO's support to GDFS units could be furtherstrengthened. GDFS training and staffing are still insufficient. GAO budget directorate couldstrengthen its support to line ministries' GDFS through training. Further sectorial expertise could alsobe built up in GAO in order to underpin the achievement of fiscal targets in all sub-sectors. Moreover,problems of overlaps in competencies and lack of coordination need to be resolved in line Ministries,5 Where overall expenses in 2011 exceeded EUR 1 million.35
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