May 26, 2015 11:08 AM

Greece mulls levy on undeclared deposits to raise cash

The Associated Press

ATHENS, Greece (AP) Greece is proposing to legalize tax-dodgers' undeclared money for a fee, a way to raise money as the country tries to reach a deal with creditors to get more bailout money and avoid default.

Finance Minister Yanis Varoufakis said Tuesday he is considering a 15 percent levy on undeclared foreign deposits, and double that rate on undeclared deposits in domestic banks, as an enticement for tax-dodgers to legalize their assets.

The idea comes as the cash-strapped country is struggling to complete negotiations with bailout creditors over reforms required for it to get a vital 7.2 billion euro ($7.9 billion) rescue loan payment. The new, radical left-led government in Athens says that without the money it can't make a debt payment to the International Monetary Fund on June 5.

Varoufakis insisted that the payment will be made because a deal will be struck by then. "That is my new dogma," he told a press conference , chuckling.

The four-month talks have been slow-moving and at times acrimonious, as both sides have accused each other of intransigence and time-wasting.

Varoufakis said Greek officials were also discussing imposing a small charge on cash withdrawals from bank ATMs and on over-the-counter transactions, to encourage electronic banking and fight widespread tax evasion. But in a sign of how fluid the talks are, Varoufakis' ministry shortly later issued a statement saying the idea of the charges floated by the creditors was no longer being considered.

Greece has managed so far to pay its creditors the IMF, other eurozone countries and the European Central Bank as well as pensioners and state employees every month by emptying its cash reserves. It has tapped a special emergency account for IMF payments and forced local authorities, hospitals and universities to make their funds available to the state.

But failure to honor its scheduled payments could launch the country on a downward slope, forcing it to impose limits on the free movement on money, and even adopt a new, devalued version of its old drachma currency. That, exeperts say, would throw Greece into a financial Stone Age and destabilize the rest of Europe and world markets.

Varoufakis said representatives of Greece and its creditors were meeting again in Brussels on Tuesday to complete the groundwork for an agreement.

"We are starting again the process of recording our agreements and disagreements, so that afterwards there can be an agreement at a higher level," he said.

Varoufakis added that Greece is negotiating with Swiss officials on getting Greek depositors to voluntarily declare their secret deposits there, paying a proposed 15 percent tax in return for a tax amnesty on the sums involved, and whatever rate is agreed will apply to all undeclared Greek deposits abroad.

He said a similar policy on undeclared domestic deposits would carry a 30 percent levy, but played down the risk of that prompting a large outflow of Greek deposits.


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