From regulation to regulation the same debts

With a mountain overdue debts which reaches 165 billion eurosthe government is attempting to open yet another round of relief for millions of taxpayers and businesses, bringing back to the fore a new 72 dose setting for debts to the tax authorities and insurance funds. However, the real data behind the numbers show that expectations of a massive response and a significant increase in public revenue may turn out to be overly optimistic.

The total private debt to the State and the insurance funds amounts, as mentioned above, to 165 billion euros. Of these, 114.5 billion euros concern debts to the tax authorities and the remaining 51 billion in debt to the insurance funds. However, behind this impressive size hides a different reality.

From the 114.5 billion euros of tax debts, an amount of 35.256 billion has already been declared uncollectible. Thus, the actual overdue debt is limited to 79.25 billion euros. However, even this amount is not considered fully recoverable. According to the analyzes of the Parliamentary Budget Office, the effective debt that can realistically be collected amounts to around 27 billion euros, as the rest mainly concerns old debts of more than a decade, surcharges and fines which in practice are considered extremely difficult to recover.

From the data of the tax administration it also follows that from the actual overdue debt of 79.25 billion eurosjust 6.65% or so 5.26 billion euros is currently in some active configuration. At the same time, debtors to tax and insurance funds reach 5.5 million.

The new arrangement of 72 installments potentially addresses 1.3 million natural persons and 284,000 businesseswho appear to owe a total of around 95 billion euros. However, the critical question is how much of this amount is actually recoverable.

The answer lies in the composition of the debt itself. Since the real “reservoir” of recoverable tax debts estimated at 27 billion eurosthe success of the new arrangement presupposes that debtors who have been out of settlement for years, have stopped their activity, have gone bankrupt or have debts dating back more than a decade will join it. A typical example is “Acropolis Stock Exchange”, which is among the large debtors of the State with debts which reach 15 billion euros. The experience of previous years does not allow for much optimism. They had joined the regulation of 120 installments established at the end of 2019 more than 615,000 debtorswith total debts approximately 5.8 billion euros. From these settings, only 211,551 were successfully completedbringing public coffers more than 1 billion euros in revenue. Another 84,358 remain active and concern debts of approximately 1.2 billion euros.

The most revealing element, however, is that more from 315,000 settings were lost along the way, leaving behind arrears amounting to 3.5 billion euros. In this environment, the state tries to give a second chance to debtors. However, several analysts point out that the same groups of citizens and businesses seem to be moving from one arrangement to another, recycling their debts, without achieving definitive debt consolidation.

The biggest problem is perhaps not the absence of new regulations, but the impossibility of accurate mapping of debtors. Despite the technological tools now available to the tax administration, there is still a lack of a comprehensive picture of who has real repayment capacity, who faces permanent financial weakness and who takes advantage of successive adjustment windows over time.

Under these conditions, the new arrangement of 72 doses it looks more like an attempt to broaden the tax collection base than an intervention that can fundamentally change the picture of bad debts.

Of course, there are also thousands of cases of taxpayers who are really unable to meet their obligations and possibly cannot be subject to in the 72 dose setting. For these cases, a new regulation should be instituted, which takes into account the income, the existence of assets and also the personal financial circumstances of the debtors. The plan that had been proposed to the financial staff provided for tailor-made arrangements for each debtor. Instead of horizontal schemes, the debt should be distributed in installments that take into account the taxpayer’s capabilities, giving him the possibility to follow a repayment plan that will not lead him to a dead end again.