Of Greece Germany and Porsches

I am no economist but I thought I would try this: The interlocking woes of the Eurozone seem endlessly complex. The wasteful Greeks, Italians etc. are all denounced as compared to the hard working Germans living within their means and now being forced to bail out the profligate southern Europeans. A classic example is presented in the revelation that there are more Porsche Cayennes per capitia in the Greek city of Larisa, the capital of the relatively poor agricultural area of Thessaly, than anywhere else in the world. The article goes on pointing out that a couple of years ago there were more of the luxury SUVs in Greece than people admitting to earning more than 50,000 euro a year.

It is a perfect demonstration of the folly of the Greeks; their hopelessly inefficient taxation system; their reluctance either as individuals or a nation to manage their financial affairs properly. In light of that why should the Germans bail them out? Or if the Germans are as kind and generous as to bail them out why should they not demand a heavy price in order to ensure the Greeks’ house is put in order? After all one can hardly expect the Greeks to do it themselves: they might cheat.

However, this piece of trivia about Porsches (well of course to the cognoscenti a Cayenne is not a proper Porsche: the engine is in the wrong place – sorry I digress) also demonstrates the advantages the Germans have gained from the euro and indeed Greek borrowing. Had the Greeks been behaving in a more Germanic fashion (paying their taxes, borrowing less individually and as a nation etc. etc.) then they would have been buying less of Stuttgart’s finest jeep (actually manufactured in Leipzig) which would have resulted in less of them being sold, less income to Porsche, less profits, less German employees’ less tax revenues for the German state etc.

Furthermore had the Euro not existed the Drachma would have become devalued against the Deutschmark which would have resulted in the Porsche Cayenne becoming more difficult for the Greek citizen to purchase and hence, as less were sold, the profits to Porsche would have gone down etc.

As it is German banks have lent much of the Euros to Greece which is citizens have used to purchase German products (such as Porsches). Hence, as Mick says below the bluff and double bluffs are relevant all round. The Greeks may have been living beyond their means both as individuals and as a state but that living beyond its means has helped German manufacturers, banks, investors etc.

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  • Its amusing to think that the British media are lambasting inefficient Greek taxation system. Tightening up the British system might actually have the same British media in a right old tizzy.
    Curiously benefit fraud is the subject of tonights Panorama. No doubt it will feature some industrial scale cheating which will give the Daily Mail the vapours. Eastern Europe, Asian sub continent might feature.

    But oddly benefit fraudsters are regarded as extremely bad people. But cheating the taxman……..now thats just a bit cute.
    The blac………oops I mean the alternative economy is the same economy that allows our neighbours (obviously Sluggerites are moral people) to have “indicators of wealth” as these expensive SUVs, are known……
    Is there a male Sluggerite who has not listened to his wife say “how come they can afford a jet ski?” Or a foreign holiday? Or a third car?
    And has not the Sluggerite replied that the neighbours are in a “cash only” job.
    Has no Sluggerite ever needed an urgent car repair and used the neighbour whose daytime job is in a car dealers and whose night-time job is in the alternative economy.
    And where exactly do Sluggerites buy the diesel?
    Even if we are all above that kinda thing we probably know where such fuel can be bought. Or ciggies? Or the vodka delivered by tax or ice cream van?
    No Sluggerite ever been in a bar and listened to a conversation that ended “and the tax man knows nothing at all about it”

    Are we really the only place in the world that has filling stations with signs that say “Only Legal Fuel Sold Here”?
    More honest than the Greeks?
    Less honest than the Germans?

    Seemingly only one in thirty benefit fraudsters are caught.
    Do we know the fifures for Tax Cheats?
    Self Assessment….now that sounds like a good idea.
    What percentage of returns are checked in a meaningful way?
    What penalties?

    See if Self Assessment is such a good thing………..should it not be extended from Tax to Welfare?

    Working class people cheating. Now thats a bad thing.
    Middle Class people dont do that kinda thing.
    Well not in Northern Europe anyway.

  • Old Mortality

    Turgon
    That’s a fairly accurate, if unorthodox, analysis of the Greek position. I would point out that if the Greek purchasers having nothing to sell to the Germans in exchange for their vulgar vehicles, and EU subsidies are insufficient, the Germans must, by definition, acquire a financial claim on the Greeks. Therein lies the problem for Germany and the EU in general.
    Porsche is, of course, largely blameless in this matter. It merely sells cars to people who want them. It cannot be expected to inquire as to whether potential customers should afford their products.

    FJH
    The ills of which you write are purely a domestic British issue. Sadly for the Greeks, they are reliant on the kindness or forbrearance of strangers.

  • Skinner

    Fitzjames

    I am not defending it but most people would say that working for a buck and not paying the obligatory percentage to the tax man is better than taking a buck for doing nothing at all.

  • Thats exactly my point.
    Most people WOULD say that.
    But they would of course be wrong.

  • carnmoney.guy

    I think the point is missed, the system of bribes and non tax payment is inherent, whereas here it is shady. See an exert from the NY times piece..http://www.nytimes.com/2010/05/02/world/europe/02evasion.html?pagewanted=all

    A friend recently reported that those who had savings put them in German and French banks as they didnt trust their own..go figure

    To get more attentive care in the country’s national health system, Greeks routinely pay doctors cash on the side, a practice known as “fakelaki,” Greek for little envelope. And bribing government officials to grease the wheels of bureaucracy is so standard that people know the rates. They say, for instance, that 300 euros, about $400, will get you an emission inspection sticker.

    Some of the most aggressive tax evaders, experts say, are the self-employed, a huge pool of people in this country of small businesses. It includes not just taxi drivers, restaurant owners and electricians, but engineers, architects, lawyers and doctors.

    The cheating is often quite bold. When tax authorities recently surveyed the returns of 150 doctors with offices in the trendy Athens neighborhood of Kolonaki, where Prada and Chanel stores can be found, more than half had claimed an income of less than $40,000. Thirty-four of them claimed less than $13,300, a figure that exempted them from paying any taxes at all.

  • Compare the austerity measures being forced on Greece with the effects of the Treaty of Versailles upon Germany. Are Germany and France setting the scene for another European war?

  • I wouldn’t call the Greeks lazy. There is a lot to desire in a lifestyle that involves working only a few hours a day then relaxing and enjoying life go by. The problem comes when you want all of the modern toys too, whether it’s a big car, a widescreen HD TV, iPad etc. That is not compatible with the relaxed lifestyle. So, the greeks were not lazy, just greedy. They wanted to have their cake and to eat it so borrowed to purchase the cake. The bill has come due and they are unhappy. You pays your money and you takes your choice.

  • Nunoftheabove

    carnmoney.guy

    Indeed. There is not a tax compliance culture in Greece, there never has been. It is a fairly openly corrupt state with a thoroughly rotten public sector. Entirely obvious warning signs which ought to have been made more of before they were signed up to join the club.

    I was reading recently about a very well known very capable international player who joined the lamentably successful Liverpool side of the late 80s whose immediate pre-signing ‘medical’ consisted of having a small torch shone in his eyes and being asked to touch his toes. The more recent of Greece’s equivalent episodes was paying hundreds of millions of dollars to Goldman’s to give themselves financial medical clearance to take the field of play doped to the eyeballs on crack, painkillers and steroids galore, only to subsequently blame UEFA for providing clearance to play when they get shown a red for a series of studs-up neck-high tackles which result in multiple criminal convictions for assault.

  • Abu Mikhail74

    Excellent FJH. Citizens of the country of Ansbacher accounts have no business complaining about foreign tax evasion.

    Off the point, there’s a car named after a hot pepper? What’s next, Mercedes Paprika? BMW Jalapeño?

  • thethoughtfulone

    Pah, Porsche Cayennes are small change!

    You want to spend serious money?, then buy a WRC spec rally car, …………………….and there are more WRC cars in Ireland than any other country in the world. Must be something about bankrupt countries and motors!

    Or being serious, is it just a common theme of the state in those countries giving too much to it’s citizens (or not taking enough from them as the case may be) and not keeping enough for itself.

  • Skinner

    Fitzjames

    It’s a moral question and the fact is that people look more kindly on those who are prepared to get off their behinds and make a living for themselves. Both the tax cheat and the benefit fraudster leave the taxpayer short but I have sympathy for the view that the former is less bad than the latter (but still bad).

    Indeed the fact of benefit fraud probably increases incidences of tax evasion. People are understandingly miffed at having to pay tax on hard-earned income only to see it being handed out so freely to people who can’t be arsed. Benefit fraud causes people to lose faith in the system.

    You seem to think it’s a class issue, indicating that tax cheating is a middle class crime and benefit fraud is a working class crime. In my experience it is the working class man who is more likely to work in a “cash only” job and have the option whether to declare his income properly. And he is more likely to live next door to the very bastard that is getting the handouts, thus the inequity in the system is more visible to him.

    If the ‘cute’ tax cheat is a perception at all it’s predominantly in the ROI. It’s mostly frowned upon elsewhere (albeit not frowned upon as much as benefit fraud).

  • Nunoftheabove

    FitzJames

    “What percentage of returns are checked in a meaningful way?
    What penalties?”

    The more automated assessment there is the greater the odds of the checking being both reliable and fruitful as well as high volume but a seneisble degree of risk-related assessment is cost-efficient (who wants to spend pounds chasing pennies ?). Just a pity we (i.e the taxapayer, as opposed, say to a tax avoider or a benefit fradster) have to pay HMRC to administer it as opposed to, say, a competent efficient provider. The penatlties are however stiff if you’re apprehended, make no mistake about it. You really need to be clearer about what you mean by cheating though – neither mitigation not avoidance are cheating as they’re perfectly legal just as claiming whatever benefits you’re entitled to under the law to their maximum material advantage is perfectly legal even when it’s not necessarily ‘naturally’ justified with reference to the circumstances (DLA, anyone ?). Evasion is not and you don’t want to be there when they knock the door if you have been evading on any scale.

    Skinner is right about the impact which benefit fraud has on levels of voluntary tax compliance in the middle classes and understandably so. You can also with some justifcation argue that benefit fraud also impacts levels of benefit to those who actually are genuinely entitled to it.