Greece seeks to plug its 'Bermuda Triangle' of lost taxes

Yahoo – AFP, Sophie Makris, 5 March 2015

Handout photo taken by the Hellenic Coast Guard on February 20, 2015 

shows a seized boat which was transporting large quantities of illicit cigarettes,

 in the western Greek port of Igoumenitsa (AFP Photo)

Athens (AFP) - It could be a scene from a thriller: a ghost ship abandoned in the crystal-clear bay of a Greek island, its hold crammed with millions of illegal cigarettes, the crew nowhere to be seen.

And no one knows where the freighter Amaranthus or its cargo were bound for when it beached on the island of Zanthe off the Ionian coast of western Greece in December.

But such discoveries are now almost routine for police as cigarette and petrol smuggling has become big business in crisis-hit Greece.

Every country in Europe has a problem with cigarette smuggling but in Greece -- which has the highest proportion of smokers of any developed country -- it has mushroomed since the economy sank into crisis.

A security official, who asked not to be named, told AFP corruption and a lack of resources had caused "major failings in the Greek Customs system" with few major seizures or investigations into smuggling rings.

Yet it is by cracking down on this multi-billion euro business, and the even more lucrative trade in petrol smuggling, that the new left-wing government hopes to find some of the money it needs to pay off Greece's gigantic debts.

Prime Minister Alexis Tsipras has made stamping out fuel and cigarette fraud one of his priority reforms, with the state losing an estimated 1.5 billion euros ($1.7 billion) a year in petrol tax alone, and between 500 and 600 million euros in lost revenue on tobacco.

Cigarettes and taxes

According to the market research company Nielsen, which used official Greek data, more than one cigarette in five smoked in Greece last year was smuggled, compared with only three percent in 2009 when the crisis that has devastated the Greek economy first struck.

But with the price of cigarettes rocketing, and cash-strapped governments raising taxes on them five times in as many years, researcher Ioannis Michaletos of the Institute of Defence Studies and Analyses said "the only efficient way of countering smuggling was to cut the tax on cigarettes".

This is not, however, what the government desperate to fill the state's empty coffers want to hear, and it seems determined instead to tighten controls and fully implement European rules on the traceability of cigarettes.

Michaletos is sceptical any such crackdown would work "given that European states better equipped than Greece have not had much success."

Even if the number of seizures is now increasing -- up by a half in the first part of 2014 -- it is another thing to track down those running this tentacular trade, he said, with counterfeit cigarettes coming not only from China but also from Greece's own substantial tobacco crop.

Handout photo taken by the Hellenic Coast Guard on February 5, 2015 shows

 seized cartons of illicit cigarettes at a Coast Guard warehouse in the port of 

Heraklion on the island of Crete (AFP Photo)

In addition, a separate huge VAT fraud involves cigarettes made in Europe for export being sold at home on the black market.

Petrol scams

But the loss to the Greek treasury is even more serious when it comes to petrol taxes. One fifth of the petrol used in Greek cars has been adulterated in one way or another, an industrial research centre found in 2012, mostly with petrol for boats which is taxed at a much lower rate.

Another major scam involves petrol distributors selling into neighbouring countries such as Bulgaria, Macedonia or Turkey but holding back some or all of their petrol to sell on the side at home, Giorgos Asmatoglou, president of the Greek petrol station owners' association, told AFP.

He claimed that successive governments had promised to put end to the practice, but that with hard-left Syriza party in power there seemed to be a "new will" to tackle it, particularly as a new deputy budget minister, economist Dimitris Mardas, had long studied the fraud.

Asmatoglou said using GPS to control the chain of distribution -- a measure that has been gathering dust for years -- could "change everything", ending much of the fraud at a stroke.