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Procedia - Social and Behavioral Sciences 73 (2013) 581 – 589

The 2nd International Conference on Integrated Information

Corruption in tax Administration: Interviews with Experts

Nikolaos P. Antonakasa, Antonios E. Giokasb and Nikolaos Konstantopoulosc *
a
University of the Aegean, Dept of Mediterranean Studies, Ph. D. Candidate, 1 Dimokratias Ave.,85100 Rhodes Greece
b
University of The Peloponnese, Department of Economics, 221 00 Tripolis, Greece
c
University of the Aegean, Dept of Business Administration, Michalio Bldg, Michalon 8, 82100 Chios

Abstract

Corruption in tax administration is attracting much attention worldwide, because of its strong negative effect on the economic
performance, particularly through the impact on tax revenue and fiscal deficit. However, corruption in Greece appears to be a
powerful element in the operation of certain public services and tax administration is a very attractive area for corruption,
since the incentives for the involvement of somebody are obvious. This paper surveys issues related to the causes,
consequences, and possible corrective actions for the case of corruption in tax administration. A total of 12 interviews with
experts were conducted in person in order to obtain information and explanations about this phenomenon. The experts were
selected taking into account their long experience in such matters. The results indicate the root causes and the best corrective
action, as well as the consequences of corruption in the Greek Financial Services.

© 2012
2013 The Authors. Published by Elsevier Ltd. Open access under CC BY-NC-ND license.
Selection and/or peer-review
and peer-review under
under responsibility
responsibility of The
of The 2nd2nd International
International Conference
Conference on on Integrated
Integrated Information.
Information

Keywords: Corruption; Tax Administration; International Business; Management; Strategic Business; Organizational Behavior; governance
Greece

1. Introduction

The phenomenon of corruption has been regarded as a potential problem in the majority of the countries
throughout the world, both developed and developing, in the public, but in the private sector too. Corruption
exists at the global level including the developed countries, where it probably exists in new forms [1]. Similar
phenomenon have been the point of interest in numerous studies, with the employment of computational methods
as the dominant research methodology [2 – 16]. However, such a phenomenon is not an issue of the modern
society.
Particularly, it is as old as the first organization of human society.

* Corresponding author. Tel.: +06977628877; fax: +02105222583.

E-mail address: nickantonakas@yahoo.gr

1877-0428 © 2013 The Authors. Published by Elsevier Ltd. Open access under CC BY-NC-ND license.
Selection and peer-review under responsibility of The 2nd International Conference on Integrated Information
doi:10.1016/j.sbspro.2013.02.094
582 Nikolaos P. Antonakas et al. / Procedia - Social and Behavioral Sciences 73 (2013) 581 – 589

Tax administration is a very attractive sector for corruption because the incentives for someone to engage with it
are obvious. Corruption in tax administration is a problem that arises primarily in the interaction between
Revenue Administration and business. This interaction usually leads to benefit both tax inspectors and
businesses, and the loss of total tax revenue. This collusive corruption is at the heart of most problems
associated with to a malfunctioning tax administration. A well functioning tax administration is fundamental not
only for the total government revenue, but also for the entrepreneurship, because some companies will come to
bear heavier tax obligations, in relation to others using informal negotiations. Some businessmen prefer to have
an arrangement with tax officers when they are inspected than paying normally their tax obligations. In other
words, a businessman is willing to bribe if there has been a profit from the specific transaction. In Yemen,
businesses report that paying a bribe of about 25% to 40% of the tax assessment can lower it by 50% [17]. This
case is not a predatory act where tax officials prey on businessmen who become the victims. Is a real business
transaction, from which the only loser is the Government Revenues [18].
A solution to the problem of corruption in tax administration is therefore crucial for any government. It is
desirable for any government to try to detect, to penalize and to fix corruption in tax administration. The result
depends on the level of corruption. Some countries (Peru, Uganda, etc) recognizing that the tax Administration
has become so corrupt that there was no other solution, than to completely close the existing tax administration
and replace it with a new organization.
However, in Greece corruption appears to be a powerful element in the functioning of certain public services.
According to evaluation by Transparency International’ s latest Global Corruption Barometer [19], Greece
ranked at the 78th position among 178 countries, last among the 27 European Community countries. Worth
noting is that according to the latest (2010) survey of Transparency International Greece for the first time was
indicated a remarkable change in the extent of corruption, with rates of reported incidents to have been reduced.
The reason for this reduction is attributed to the wider economic crisis and the austerity measures that inevitably
hit the front of the micro – corruption. Meanwhile the Revenue Administration was ranked as one with the
poorest performance among public services because of corruption.
Over the last years, the problem of corruption in Greece is gradually inflated and corruption has expanded
beyond any reasonable limit, so the dilemma is already apparent, the corruption will collapse or the position of
the country will be undermined, since the money from European Community is not endless. The time of crisis
will soon come [20]. However, it is the government and the parliament that is responsible to stigmatize and
punish any person who has the power and abuse it for private gain. The intentions of the political leadership are
not enough. There is an urgent need to be taken immediate actions to reduce corruption, not only because it will
increase public revenue, but it will increase legality and social equity.

2. Methodological framework

In this study we have taken interviews from a target – group of people who have a deep knowledge of the
phenomenon of corruption in the Greek tax administration. The target group interviewed consisted of:
∞ Executives of Control, Tax and Customs Services
∞ Tax and Custom officers who have brought in Court for committing corruption offences
∞ Businessmen, Accountants, Custom Agents who have previous relevant experience

It was used a unique questionnaire of about 24 questions in which were combined theoretical models and the
dimensions of the practice of corruption, as was documented in previous research and was demonstrated by the
recorded incidents of corruption in Greece. Special effort was made to respondents to express their views freely.
So, the anonymity of respondents was strictly respected. The whole process was recorded. Data were collected
from 12 interviews, all in person, carried out during the months of January and February 2012 in Athens.
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To be fully understood the phenomenon of corruption in tax administration must have at least the opinion of
the specific part of society which it has to be acknowledgment is often the source of corruption or, at the very
least, a participant in the misuse of public authority for private gain [21].

3. Results

The answers to the questionnaire divided into categories of causes, consequences and corrective actions, were as
follows:

3.1. Causes

According to the data derived from the contributors of our survey the main causes for the corruption in tax
administration are the following, while the frequency of answers in the field of causes is shown in Figure 1:

Fig. 1 Frequency of answers in the field of causes

3.1.1. Penalty System – Impunity

Most of the respondents considered the existing penalty system for those who are engaged in acts of corruption as
the main cause of corruption in tax administration. It is fact that relatively few people have been punished,
despite the extent that this phenomenon has received in Greece. The procedures provided for civil servants
involved in acts of corruption are time consuming and in the most of the cases, facilitate for them to be exempt.
Disciplinary Councils which are responsible for attributing categories to the corrupt civil servants had such
composition ( 3 civil servants – including the Chairman – are putting by the political leadership, and the 2 others
584 Nikolaos P. Antonakas et al. / Procedia - Social and Behavioral Sciences 73 (2013) 581 – 589

representatives of the workers), that the General Inspector of Public Administration L. Rakinzis speak for too
lenient sentences. For this reason he made formal objections to the 10% of the Disciplinary Councils’ [22].
Furthermore, the process in the Court for imposing the penalties to the corrupt officials is so slow. For all these
factors the role which penalty system plays in Greece is limited. Furthermore, there has created a perception that
corrupt officials do not receive the punishment they deserve, and there are some who believe that corrupt officials
rewarded instead of punished. The state where corrupt officers in the public sector are not stigmatized and are
not imposed the appropriate penalties, may lead to a situation where corruption is already a status in the society
(Koutsoukis,1997) [23]. With the exception of a few countries, there seems to be a wide gap between the
penalties specified in the lows and regulations and the penalties that are effectively imposed [24].

3.1.2 Political intervention

It is not surprising that most of the respondents considered that political intervention is also one of the main
factors of the corruption in the specific area. It is known that political parties that govern Greece in recent years
have strong connections with the area of Public Administration. On the other hand, a significant part of public
servants has joined to the two parties in power, thereby increasing the degree of intervention in public
administration. Furthermore, this generally took place in the form of discretionary tax exemptions granted to
business people who were willing to pay and/or had “the right connections” [25].

3.1.3 The culture of the civil servant

The culture of the civil servant is a factor which plays very important role in the corruption in the tax
administration. In this case the perception that civil servants in Greece have such culture that drive them to
engage in acts of corruption can be attributed in an effort to discover the underlying motives which predispose
people to these kind of actions.

3.1.4 The standards of Values

The relationship between job attitudes – behaviours and standards of values is not linear, mechanistic and static,
but multifaceted, multidimensional and mainly constantly and dynamically redetermined [26]. Consequently, if
Standards of Values are humiliated and degraded, officers may reconsider their job attitudes – behaviours and
they might be more inclined to engage in corrupted acts.

3.1.5. The way civil servants are recruited and promoted

Respondents suggested that the way the civil servants are selected for tax administration is not the appropriate.
Special reference was made to the system of transferring employees from other Ministries to the Ministry of
Finance. Respondents identify that these civil servants are they who usually are involved in cases of corruption.
They also argue that the system of promotions not help in fighting corruption. When the Director of a tax service
do not provide the right example, either because he is corrupted, or because he is unable to recognize which of
his subordinates is engaged in acts of corruption, there is not expected that the specific service can be corruption
– free.

3.1.6. Level of salaries

Since ancient times the rulers were trying to reduce corruption in tax administration, by giving to the officials
financial incentives and better salaries. In Ancient Egypt, the Pharaohs in their effort to reduce corruption of
their tax collectors, they decided to pay them high salaries. Even nowadays several countries (Argentina, Peru,
etc) under the same thought of reducing corruption, they have increased the level of salaries for the officers who
are working in tax administration. In Sweden, where corruption flourished in the second half of the eighteenth
and early nineteenth century, from the second half of the nineteenth century up to day, corruption seem to have
been relatively absent. This could be attributed to the well paid of the public sector administrators (12 – 15 times
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the salary of an average industrial worker), which may have reduced the temptation to accept bribes [27].
Obviously, if officers are poorly paid, or become so as a consequence of an adjustment strategy, for example,
wage control in a context of massive price increases, they might be more inclined to engage in corruption [28].
By contrast in Greece, there is not differentiation in the salaries received by tax and customs officers with other
civil servants, and despite the really difficult working conditions (shift work, on the border, etc). Moreover, they
recently received a significant reduction in their salaries.

3.2. Consequences

According to the data derived from the contributors of our survey the main consequences of corruption in tax
administration are the following, while the frequency of answers in this field is shown in Figure 2:

Fig. 2 Frequency of answers in the field of consequences

3.2.1 Create conflicts

One consequence of corruption in tax administration according the respondents is the creation of conflicts
between the honest and the corrupted officers. It is impossible for honest officials not to realize that some
colleagues are engaged in acts of corruption. As a result in the Office is created a hostile environment.

3.2.1. Reduce effectiveness

As a consequence of corruption in tax administration is the reduction of the effectiveness. This could be
attributed in two reasons. First, the honest officers realizing the existence of corruption in the tax office end up
indifferent in their job. Second, the corrupt officials are interested only in those cases that can give them earning
and are completely indifferent to the daily routine.
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3.2.2. Opposing to changes

The corrupt officers react to any changes that are to be made in the Service. From a simple differentiation in the
every day routine, to the implementation of institutional controls or expanding computer services. The specific
behaviour can be explained by the fact that the corrupt officers fear that the changes may complicate the way they
are working or even their illegal activities could be uncovered.

3.2.3. Negatively affects entrepreneurship

In corrupt environments more potential entrepreneurs will allocate their time and efforts to non innovative
activities such as lobbying and bribing government officers, instead of being involved in productive entrepreneur
activities [29]. According to a research by Gil Avnimelech, (2011) [30] , there was clear evidence that
corruption, after controlling to all variables that might be correlated both to corruption and to entrepreneurship,
has a significant negative impact on entrepreneurship.

3.2.4. Reduce tax revenue

Corruption in tax administration reduces the amount of money that the state should receive through losses in
tax and customs revenue. So, it contributes to larger fiscal deficits, and decreases the efficiency of public
spending. In addition corruption in tax administration may also distort the fiscal policy.

3.3. Cures

According to the data derived from the contributors of our survey the corrective actions in order to fight the
phenomenon of corruption in tax administration are the following, while the frequency of answers in this field is
shown in Figure 3:

Fig. 3 Frequency of answers in the field of cures

3.3.1 Assets control of officials

The existing control system of officials’ assets (the same as the political persons) is bureaucratic and inefficient.
There is no possibility for receiving electronic data and doing crossover with the banks, stock market, land
registry, etc. Moreover, a relevant formal request for assets data could be answered after several months. So,
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there is need for a new system of officials’ assets control,. This means that it will be more difficult for them to
conceal disputes arising annually in property, bank deposits, shares, investments, etc. This will be a major
contributor to discover and catch corrupt officials and can also reduce the incidence of the phenomenon of
corruption.

3.3.2 Changes in organizational structures

The need for changes to be done in the organizational structure of tax administration’s services was strongly
appeared in the survey. The current organizational structure and the way of working is rather outdated and does
not meet the modern needs. In any case, nowadays there has been in progress a program of radical changes in
the Greek tax Service under the supervision of International Monetary Fund (IMF). The problem with this
restructuring plan is that the expected positive results will be seen after a few years. In the meantime, the system
will operate at a slower pace

3.3.3 Institutional Controls

The role of the institutional control is to discover and catch anyone who acts corrupted actions. It is interesting to
note that in Ancient Egypt, the Pharaohs in their effort reduce corruption of their tax collectors (ubiquitous
scribes), they decided to pay them high salaries, in order to reduce the incentives to enrich themselves.
Furthermore, they exercised control over them by a group of special scribes at headquarters [31]. The existing
institutional control in Greece, under the name of Economic Inspection, reflects the attitude toward the
phenomenon. But this service does not have sufficient stuff, while also responsible for financial audits of
Municipalities, Universities, Foundations, etc. which distract Economic Inspection from its main task, that the
audit of the tax administration and the fight of existing corruption. In addition staff lacks the appropriate training
in auditing and inspection methods, while there is a great shortage of the basic facilities.

3.3.4 Better staffing

Staff working in financial services has not been hired because of any special qualifications required by the nature
of work. In addition the system of transferring employees from other Ministries, a procedure which involves
political intervention makes things worse. Moreover, the survey revealed that transferring employees are those
who primarily are involved in corrupt activities. This raises an urgent need for better staffing and mainly the
prohibition of transferring employees from other Ministries and Services.

3.3.5 Exemplary punishment

The punishment system for those who are found to have participated in corrupt activities is not effective.
Disciplinary Committees, which are responsible for attributing categories, have been accused for been too
lenient. Furthermore, the judges who will impose the penalties may themselves be accessible to corruption or
may have political biases, so that may be bought by the accused or may put obstacles to the proceedings [9]. In
addition the trial of corrupt cases in the courts takes too long. So there is an argent need for a new punishment
system in which punishments will be very strict and exemplary, and the whole procedure will be completed
shortly.

4. Conclusions
This paper represents an effort to find out the underlying causes and consequences of the phenomenon of
corruption in Greek tax administration and additionally to propose some corrective actions in order to combat it.
The study of the specific phenomenon has in advance great difficulties, since there is not an appropriate matter
for discussion, and all the participants strive for concealment. The knowledge gained from within, could
legitimately serve the scientific truth, but also could contribute to suggesting solutions for reducing this
pathological phenomenon. The interviews conducted with experts on corruption in Greek tax administration
588 Nikolaos P. Antonakas et al. / Procedia - Social and Behavioral Sciences 73 (2013) 581 – 589

suggest some causes and consequences of corruption trough a perspective of someone who has his own
experience on the subject. Also suggest some ways to correct the current situation and fight the phenomenon.
The aim of this paper is also to create greater awareness of the subject, and to highlight about the need to combat
the phenomenon, which in Greece derives the state of several billion Euros.
After all, while corruption in Greece has probably been systemic, and the country is one step away from
bankruptcy, being recently under the supervision of the Troika (IMF, EU and ECB), a successful anti –
corruption effort is maybe the only way for the state to increase significantly its revenue and to avoid finally the
worst.

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