Reflections on the ultimate conclusion of punitive taxation
Greco was making his rounds, one cool December morning, when he turned the corner and saw an unexpected sight. One of his clients, a shopkeeper who was never late with his protection payments, was sitting on the park bench in front of his shop, covered in bandages, gently rubbing his cheek and temples.
“Giannis!” shouted Greco as he strode up. “What happened? Were you in an accident?”
Giannis looked up. “Yeah, it was an accident, all right.”
“You look like you were hit by a bus!” said Greco. “Will you be okay? Were you driving? Were you just crossing the street?”
Giannis shook his head no. “No, it wasn’t that kind of accident, Greco.”
Greco’s worry turned to anger as he put two and two together. “Somebody beat you up?” Giannis nodded. “Who was it?” demanded Greco. “I’ll take care of it! Everybody in town knows not to mess with my clients! They’ll never walk again!”
Greco was, after all, a minor mob boss in the south of Europe, and he’d been running his protection racket for decades down in that sunny and beautiful land. He’d undergone some hardships in recent years, though… his bag men taking early retirement, his customers dwindling as the economy suffered, his own reputation in the mob taking a hit as he became the punchline of jokes told by bigger bosses like Madame Angela, Slick Nicky, Silvio the Scrivener, and even Dashing David of Downing Street. They all make jokes at Greco’s expense these days, and even Greco isn’t too proud to say it doesn’t smart.
But Giannis said “Calm down, Greco, though I’m grateful. You can’t do anything about this one.”
“Whaddaya mean, Giannis?!” exclaimed the mobster, already putting on his driving gloves and beginning to crack his knuckles in anticipation of a fight. “You’ve paid on time for years for my protection, and it’s known far and wide that nobody better mess with one of my clients! If you take a beating, you deserve revenge!”
“No, no, Greco. Sit down and read this.” Giannis motioned to him to join him on the bench, and handed Greco a piece of paper.
“Notice of Escalation: Penalties for Non-Payment of Taxes.” Greco wasn’t the quickest reader, but even he could figure out what had happened here without getting much past the headlines. “The police? The police did this to you?”
Giannis shrugged his shoulders. “I guess inability to pay is no longer justification for non-payment. That’s what they said. And kept saying, as the blows fell.” Giannis picked up a San Pelligrino that he had been nursing before Greco arrived, and took a sip. “They came to the district in force the other day… dozens of them… instead of the usual inspectors all in suits, carrying briefcases for an audit, these guys entered the neighborhood in groups, a couple of inspectors and a couple of police. These teams would go into a shop, demand records to prove compliance, and if we didn’t move fast, we took a clobbering.”
Greco was astounded. “Did anybody fight back?”
“How could we?” chuckled Giannis, though it hurt to laugh. “You know the shopkeepers around here – we’re forty, fifty, seventy… some are old men and old women, like Petra and Konstantinos and me.”
“Don’t you have young staffers who could stand up and deflect the blows, get them to stop?” Even Greco, a man who’d been known to use brass knuckles and the occasional violation of the Marquis of Queensbury rules on occasion, was horrified to hear about police beating up defenseless old shopkeepers. He might expect that of his own crowd, but not of law enforcement authorities!
Giannis motioned to look around. “Look up and down the street, Greco. When’s the last time you saw more than one person running any of these shops, except for the restaurants? (and even in those, they’re understaffed if they have more than a couple of couples…)” Giannis took a delicate sip of his San Pellegrino and continued. “No, we don’t have clerks, tailors, seamstresses, loading dock personnel, anybody. We can’t afford the staff.”
Seeing no spark of recognition from Greco – well, he never was all that quick – Giannis explained. “Why do you think half the country’s unemployed? Storekeepers start by not hiring extra workers, not hiring summer help or Christmas help or other seasonal help, making do with what they have. Then when that’s not enough to cut costs, they start cutting their employees’ hours, cutting back their own pay, reducing whatever frills they can reduce.”
He reached into his pocket for a bottle of OTC pills… maybe Ibuprofen or Acetaminophen… Greco never could keep those things straight; when he needed something for pain, he just drank half a bottle of Ouzo or Metaxa. He patiently watched the old shopkeeper pop the pills and take a painful slug of San Pellegrino; then Giannis went on with his story.
“So most of us, Greco, are just down to the proprietors themselves,” said Giannis. “We small businessmen have a lot of leeway with how we spend our money, if the economy’s good and we’re making sales. We can invest, we can hire people, we can give our clerks raises, we can improve or expand, we can donate to local charities, sponsor local soccer teams... there’s so much we can do, and it’s all good, for the neighborhood, for the community, for everyone.”
“But when the economy’s not good?” asked Greco, still not clear on the economic catastrophe all around him.
“Well, when the economy goes down, our sales go down too. First it cuts into the profit, then into inventory, into basic operating expenses, into personnel. Different for every business, I suppose… some might shrink their store first, some save on heating and air conditioning first… some let the place go a little, not hiring painters as often, not replacing the old carpeting. Eventually, all the stores in a district look shabbier, less inviting to customers. So it becomes a vicious circle.”
“A what?” Greco was confused again, this time by the latest idiom.
So Giannis explained that too. “A vicious circle is a self-perpetuating problem. It’s when things get worse, causing other things to get worse, which causes other things to get worse, and so on, and so on.” Greco started to nod in understanding, so Giannis continued. “There are fewer sales, so there’s less money to run a good store. The less impressive store has less to sell and less to draw people in, so there are fewer sales. So fewer sales are both the cause and the result. It gets worse, month after month, until eventually you can’t stretch any further, and you shut down. A vicious circle. Disaster.”
Greco looked up and down the street… shabbier, sadder, emptier than he had ever known it to be, and he’d been shopping and visiting Agia Varvara all his life. “And this isn’t just you, it’s happening to everybody?”
“Yes, pretty much everybody, Greco. So anyway…” the old man said, getting back to the main point, “we’re all smaller and weaker, individually. A bunch of sole proprietors who can’t afford to pay their taxes, so we’re on the wrong side of the government. And when it’s the government against a sole proprietor, the sole proprietor just doesn’t have a chance.”
Greco swayed his head from side to side. He’d heard that it was getting rough out there, but this was too much. Sure, they’d cracked heads before, but that was at demonstrations that went too far; you could understand that… These businessmen were in their own shops, minding their own business, when the tax collectors descended on them with the full force of the Greek government behind them. Talk about uneven odds!
“But what do taxes have to do with it?” asked the mobster, whose understanding of economics was always rather limited. “I mean, you charge the tax on a sale, so if there’s no sale, there’s no tax, right?”
The old man sighed. “No, Greco, it’s not that simple. For one thing, there are other taxes besides the national Value-Added Tax, that you and I call the VAT. That’s what you may see on a sales receipt, sure, but there are lots of other taxes that we can’t escape – the tax on fuel for truckers to deliver my inventory, the tax on the rent I pay to my landlord, the tax on my personal income and the income of my business. Whatever I make in the margin between the before-VAT cost of the product I bought and the before-VAT price for which I sell it, that margin is divided up a hundred ways, paying for my rent and staff and equipment and cash register and internet access and phone service and my family… We get Euro-and-Drachmaed (nickel-and-dimed) by the tax man at every step of the way. All these taxes make everything harder. Harder to make enough of a margin to stay in business.”
“Can’t you do anything to cut these costs?”
“Sure, but not the taxes.” Giannis pointed at the sign-painter’s shop down the block. “See, the sign-painter can agree to cut his price by 20% so he still gets a sale, just with poorer margin. The vendor of your merchandise can agree to cut his commission or otherwise cut the price of your goods so that he still gets a somewhat-less-profitable sale, and you still have something new to sell in your store. But you can’t do that with the government. If you owe 17% for this, or 25% for that, or 33% for this other thing… then that’s gonna stand. The government doesn’t negotiate to reduce these tax rates, they just raise them higher. So as government grows, that tax bite grows, and at the very worst possible time, too!”
“So why is everything so bad nowadays?” asked Greco. “Hasn’t government always grown, always taxed, always acted like that?”
“Well, that’s the funny thing,” said the old man, as he sat back on his park bench, this time rubbing his shoulder, which must have now begun to hurt more than his head. “The change was slow. When I was a boy, the government was everywhere, but they were small… they were mostly army, that’s what you noticed, and we figured taxes were for the army, and of course you need that, so you don’t object.”
Giannis looked across the street to a little war memorial – one of the many commemorations of the partisans of so many wars over so many centuries in his troubled land – that he must have seen ten thousand times in his many years on this street. And then he crossed himself as he thought about their sacrifice, and for what an ungrateful country so many valiant men had given their lives. This he didn’t do, or think about, quite so often anymore.
“But then, slowly, so you wouldn’t notice it, government started to grow. They had more inspectors, and more agencies, and more bureaus. Nobody knew what most of them did, but there they were, with public buildings and storefront offices for welfare and food and housing support, and society needs these things, so nobody questioned it, though I guess nowadays we’re beginning to wonder how there got to be so many of them. Now everything seems to be run by the government, or checked by them, or approved by them – healthcare and housing and manufacturing and tourism and transportation and so much more – and that takes a lot of people, and a lot of money, so taxes go up.”
“But doesn’t all that government make society a better place?” asked Greco. “Aren’t those all good things – healthcare and housing and public transportation and such?”
Giannis shook his head. “They WERE good things, Greco. But they’re not as good when the government runs them, it turns out. Oh, we didn’t realize it at first. But after all these years, it’s become clear. It really was just simple math all along. Government people don’t pay the taxes, they use up the taxes, right? So when 90% of the people were paying for 10% in government bureaus, it was one thing. But then it became 80% of the people paying for 20% in government agencies. And then 70% of the people paying for 30%. And before you know it, it was fifty-fifty between the private sector and the public sector! Well, that can’t possibly sustain itself for long!”
“But you still have tourism and stuff, don’t you? Isn’t that like free imported money? Americans and Japanese and Chinese and Europeans and Canadians, all coming here to spend there money in your stores… we’ve always been told that was what made you shopkeepers rich!”
Giannis just stared at him for a moment. “No, we were never rich. Maybe a few, in the tony district by the cruise ship docks, but no, most small businesses, here and everywhere else, just scrape by. In a decent economy we can make a decent living, but in a lousy economy, we’re the first to suffer. Look up and down the street, Greco. See the empty storefronts? That’s people like me – businesses that have struggled for years, waiting for a recovery that never happened, finally giving up when they just couldn’t stretch anymore. And now with the global recession and the local riots driving tourism away, we’re just dying here.”
Greco pondered for a while, then asked “I still don’t see why the police would beat people up, though. You may not have much to pay, but you still pay the taxes, right?”
Giannis looked down, embarrassed. “No, Greco, some of us have been getting desperate. When taxes get too high and businesses are dying, we start grasping at straws to find a way to survive. Some of us, sometimes, will offer to ‘absorb the tax’ and sell something without the VAT, and we just won’t give them a receipt. It’s double-entry bookkeeping and we know we shouldn’t do it, but things are just so bad…”
Greco knew he was an illegal business, but he never dreamed his clients were. What, is everybody dishonest in this world? “Is this really widespread, Giannis?”
“I guess it must be, Greco. I mean, we don’t talk about it amongst ourselves, but when the police came to see me, I figured they’d caught me doing sales without receipts, and it was just me. I was as surprised as anybody when they showed up at Petra’s door, and at Panos’, and Vassilis’.”
Giannis drank some more San Pelligrino and continued in another vein. “It’s the austerity along with the taxes that are making it doubly hard. See, the austerity measures have the government cutting back the checks they mail to people, leaving them with less spending money. And they have the government cutting government employees too, so at the same time they’re raising taxes on the few of us still working in the private sector, they’re making more and more potential shoppers unemployed. At least when the government had money, they could keep the Ponzi scheme going by having all those well-paid government employees in place. Shopping districts knew that even if tourism took it on the chin, there’d always be bureaucrats who were flush with cash. But not any more, thanks to Brussels putting an end to that gravy train too.”
“Can’t anything be done?” asked Greco, genuinely concerned for his old client, as he watched him wince in pain there on the bench. “Can’t this mess be turned around?”
“Not likely,” answered Giannis. “The only solution is to inspire a boom in the private economy. All these tax increases just keep driving manufacturing away, and all the riots have finally started to drive tourism away. So there’s nothing left. I think we’re doomed, old friend.”
Greco got up, and straightened his pea coat and fisherman’s cap as he prepared to walk away. “Anything I can do for you, Giannis? Anything I can get you?”
“No, Greco, I’m okay. I have some painkillers here; I guess I’ll get better. I just don’t know how I’m going to save my shop.”
Greco thought for a moment, and in a rare instant of generosity, said “Look, no protection payment this month, okay? If I couldn’t protect you from the government thugs, well, I guess the least I can do is skip a month while you recuperate. Get well soon, Giannis. Best of luck.”
As Greco walked away, visibly shaken by what he’d seen, the old shopkeeper was equally impressed by the moment of humanity. A mobster with more heart than the government. Will wonders never cease?
Copyright 2012 John F. Di Leo
John F. Di Leo is a Chicago-based Customs broker and international trade lecturer. His columns on economics and government appear regularly in Illinois Review. This particular column is of course a work of fiction, and any similarity between these characters and any real person, living or dead, is purely coincidental. The general circumstances in which Greco and Giannis live, however – the economic catastrophe that is Greece today, and that may be the USA tomorrow – are sadly all too real.
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