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A step too far?

12 December 2019

Many countries have had problems with the so-called "black economy".

Generally speaking, governments rely on people to declare all their income in order that it may be taxed fairly and evenly. These taxes are then used to provide funding for critical services and infrastructure.

In the past, ensuring compliance with the requirement to declare all income has been something of an issue, since there is no easy way to track cash payments. "Cashies", or jobs done for payment without the declaration of said payment as income tends to distort the tax system and place an excessive burden on the honest, to the benefit of the dishonest.

For some time it looked as if the shift away from cash and towards electronic (often card-based) payment systems was going to represent a real blow to the black economy. Payments made by EFTPOS or credit card are easily traced and this helps identify those who might be rorting the system.

However, some countries still seem to have a problem, and Greece is one of them. To address this issue the Greek government is introducing an unbelievable new law.

According to this report, Greeks who do not spend at least 30 percent of their income by way of some form of electronic payment system may face stiff fines.

That's right, if you prefer to use cash for all your purchases, you could be stung with a bill for defying this diktat, the amount equal to 22% of the shortfall between your e-spend and the 30% of your income required to be spent electronically.

Now while that might not be a problem for most people living in an urban environment or who are familiar with modern payment methods, Greece is a country with significant numbers of old rural dwellers who don't need or use the internet or money cards. These people could find themselves falling foul of this new law.

The ridiculous thing is that this law is unlikely to produce the desired result anyway.

Surely it is going to discourage people from declaring their whole income, for fear it will be so high that their electronic payments will not reach the 30% threshold.

The cash economy may even prosper because many folk may now opt to demand to be paid in untraceable cash so as to avoid the penalty if their spending isn't up to scratch.

One must also wonder whether spending undeclared crypto currency reserves will count towards this 30%.

One also can't help but wonder whether this might drive folk towards shopping online at their favourite Sino-etailer, thus depriving local bricks-and-mortar businesses of sales.

In all, this is a very poorly thought out demand on the part of lawmakers and it deserves to fail.

Sadly, this seems to be a trend recently. Lawmakers are increasingly making up stupid rules (such as NZ's "Amazon tax") that amount to extortion.

I've heard from quite a few friends that they're now shopping around when buying from Sino-Etailers and have found it very easy to steer clear of the few big-names that are effectively hiking their prices by 15% thanks to comliance with the NZ government's diktats. I'm pretty sure that losing many of its NZ customers won't bother Ali Express much but it does represent a bit of a windfall for the smaller (less compliant) etailers.

If I was a Kiwi company selling direct to end-users around the world via the internet, I'd be pretty scared right now. If NZ and Australia's attempts to force etailers to become unpaid tax-gatherers for them succeeds then you know that it's a practice that will be rapidly adopted by other countries.

If you're selling stuff to 20 different countries it might not be long before your biggest overhead is collecting tax for those 20 countries then filling out returns and remitting the funds to them. This would become a *huge* administrative burden on any small to medium-sized business. Did our government really think this through properly?

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