A mil­lion credit and debit cards is­sued in July and Au­gust as Greeks seek to skirt cap­i­tal con­trols

Kathimerini English - - Focus - BY AN­GE­LIKI KOUTANTOU

A Greek TV com­mer­cial shows two fish­mon­gers in a mar­ket tout­ing their wares. “I’ve got sea bream,” one shouts. “Me too,” says the other. “I’ve got sad­dled sea bream,” the first cries. “So have I,” his ri­val re­torts. “I take cards,” the first says, si­lenc­ing his com­peti­tor, who pulls a long face.

Other TV ads fea­ture vets and phar­ma­cists, all part of a cam­paign by banks to boost card pay­ments in a coun­try long dom­i­nated by cash. The drive is a boon for Prime Min­is­ter Alexis Tsipras’s gov­ern­ment as it seeks to boost rev­enue and crack down on tax eva­sion.

Greece lags far be­hind other Euro­pean coun­tries in non-cash trans­ac­tions. But Greeks have sud­denly fallen in love with pay­ment by plas­tic af­ter cap­i­tal con­trols were im­posed in late June and banks were shut for three weeks.

About a mil­lion cards were is­sued in July and Au­gust in a pop­u­la­tion of 11 mil­lion, com­pared to about 100,000 a month be­fore the cap­i­tal con­trols, said Athana­sios Gera­ma­nis, coun­try man­ager for Mastercard, one of the four pay­ment ser­vices avail­able in the coun­try. “Con­sumers felt the ur­gent need to by­pass the 60-euro with­drawal limit,” he said, re­fer­ring to the daily cash ceil­ing Greece im­posed in late June. The limit has since been eased to 420 eu­ros a week. “Greeks used to think that by get­ting a cash card, they were tak­ing out a bank loan,” he said. “All of a sud­den, they dis­cov­ered that cash cards can help them in their trans­ac­tions.”

Card pay­ments ac­counted for barely 6 per­cent of to­tal an­nual re­tail sales be­fore the cap­i­tal re­stric­tions were im­posed, com­pared to 60 per­cent in Den­mark.

Gera­ma­nis es­ti­mated that the pro­por­tion of card trans­ac­tions had jumped to 25-30 per­cent since the sum­mer, although it would smooth out in the com­ing months.

This could help the gov­ern­ment, which is plagued by wide­spread tax eva­sion and has promised in­ter­na­tional lenders it would fa­cil­i­tate elec­tronic pay­ments to im­prove rev­enue col­lec­tion un­der a third, 86-bil­lion-euro bailout deal agreed in Au­gust.

Busi­nesses are re­quired to is­sue a re­ceipt for card pay­ments that must be in­cluded in their rev­enue state­ments, mean­ing that tax author­i­ties are able to see each trans­ac­tion and also cross check it with bank records.

Al­ter­nate Fi­nance Min­is­ter Try­fon Alex­i­adis an­nounced in­cen­tives last week to pro­mote non-cash pay­ments in an ef­fort to di­vert money from a huge gray econ­omy which he said de­prives state cof­fers of 15-20 bil­lion eu­ros in an­nual tax rev­enues. “There will be in­cen­tives for cit­i­zens – tax in­cen­tives, a prize lottery, re­funds from banks and busi­nesses,” Alex­i­adis told law­mak­ers. There would be tax in­cen­tives for busi­nesses too to help change the coun­try’s pay­ment cul­ture, he promised.

Ac­cord­ing to a study by man­age­ment con­sul­tants A.T. Kear­ney, the shadow econ­omy in Greece was equiv­a­lent to 24 per­cent of an­nual out­put in 2013. The Euro­pean Com­mis­sion es­ti­mated it at around a quar­ter of gross do­mes­tic prod­uct in 2012.

Re­tail­ers, who al­ready have some 150,000 card read­ers at their out­lets, wel­comed the mea­sure, hop­ing it will boost sales be­cause it over­comes the weekly with­drawal cash limit, and said they would need another 400,000 ter­mi­nals to cover the re­tail sec­tor’s needs as card us­age rises. pre­pares to is­sue a credit card at a branch in cen­tral Athens, yesterday. About a mil­lion cash cards were is­sued in July and Au­gust in a pop­u­la­tion of 11 mil­lion, com­pared to about 100,000 a month be­fore the cap­i­tal con­trols.

Some shop­keep­ers were pre­vi­ously re­luc­tant to switch to plas­tic, partly due to the ex­tra cost. Mer­chants pay about 150 eu­ros for a card reader plus a com­mis­sion to the bank on each trans­ac­tion which can range from 1.2 per­cent to as much as 3 per­cent depend­ing on the card is­suer and the trader’s credit rat­ing and an­nual sales.

“It’s a one-way street for us be­cause of the cap­i­tal con­trols,” said the head of Greece’s mer­chants as­so­ci­a­tion, Vas­silis Korkidis. “As part of our ‘Cards Ev­ery­where’ cam­paign, we are hav­ing talks with the banks to get the low­est com­mis­sion pos­si­ble.” He said they wanted com­mis­sion lim­ited to be­tween 0.8 and 1.1 per­cent.

Data from the as­so­ci­a­tion showed that about 45 per­cent of re­tail sales were done via plas­tic in July com­pared to 15 per­cent a year ear­lier.

Alex­i­adis plans to make the use of cash and credit cards manda­tory for all pro­fes­sions such as doc­tors, den­tists, lawyers but also elec­tri­cians and plum­bers, as of next year and promised a re­duc­tion in the com­mis­sion charged by banks.

Doc­tors – long con­sid­ered one of the groups most prone to tax dodg­ing – ini­tially op­posed us­ing plas­tic for their pay­ment, ar­gu­ing that it would make them a tar­get for tax author­i­ties and vi­o­late their pa­tients’ con­fi­den­tial­ity. But they backed down af­ter Alex­i­adis gave as­sur­ances they would not be sin­gled out. “We met Alex­i­adis, who ex­plained to us that this won’t ap­ply only to doc­tors but, grad­u­ally, to ev­ery pro­fes­sional group and that per­sonal data will be pro­tected,” said the head of Athens doc­tors as­so­ci­a­tion, Ge­orge Pa­toulis. “Af­ter all these clar­i­fi­ca­tions, we have no rea­son to op­pose the use of plas­tic money.”

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