Report from Greece: Limited Capital Controls Implemented

 

by John Galt
June 12, 2012 17:50 ET

 

The reports of capital controls being implemented should Greece leave the Eurozone have been flying throughout the internet over the last twenty-four hours, leaving many to wonder if the European Union is about to descend into the status of a large latte sipping banana republic. Switzerland’s central bank (SCB) is already rumored to have a plan in place to freeze all incoming funds at their borders and penalize anyone attempting to convert deteriorating Euros into Swiss Francs along with currency exchange controls (See ZeroHedge, Bruce Krasting’s May 28th article – Capital Controls Coming to Greece and Switzerland). The problem with this approach is the large underground economy which it creates and unfortunately for the nation of Greece, that has already begun.

 

The concerns of the ongoing bank run by depositors in Greek banks have created the basis for a second leg of the domestic financial crisis which will collapse the system if the elections result in a conflict with the Troika and ECB regarding aid to the Greek financial system and potential default. On Bloomberg this morning the pace of withdrawals has accelerated as the article at the link below indicates:

 

Greek Bank Deposit Outflows Said to Have Risen Before Elections

 

From the story above:

 

Greek deposit outflows have accelerated before this weekend’s elections, two bankers familiar with the situation said, on concern the nation may move closer to abandoning the euro.

 

Daily withdrawals have increased to the upper end of a 100 million-euro ($125 million) to 500 million-euro range this month, one banker said, asking not to be identified because the figures aren’t public. A second banking executive said the drawdown may have exceeded 700 million euros today. An official for the Bank of Greece (TELL), the Athens-based central bank, declined to comment.

 

The problem that faces the Greek nation is that the corrupt government and insanely criminal taxation authority have been dipping into accounts and seizing funds from “suspected” tax cheats thus causing innocent citizens to conclude they are next, thus the bank runs. Add in the fact that those funds are not being reinvested into the Greek economy but being used to purchase German short term Bunds or being stuffed into the mattress and the formula for the perceived necessity of capital controls already exists.

 

The newspaper Ekathimerini dropped a bombshell of a story the Western press ignored but is causing panic inside the massive bureaucracy in Athens:

 

Smaller companies heading to Bulgaria in droves

 

These excerpts from the story highlight why this problem exists and how companies are evading the oppressive taxes inside of Greece:

 

Thousands of small and medium-sized businesses (SMEs) are looking for the road to financial recovery in Bulgaria. Even though the trend of Greek businesses relocating to the neighboring country had already begun before the crisis, in the past few months there has been a fresh spurt of interest, taking the total number that have moved there to 6,000.

 

“The first wave of Greek companies moving their headquarters to Bulgaria came in 2006, when it became a member of the European Union, and they were mostly large construction and textile firms,” Alexandros Adamidis, a lawyer who heads a company that specializes in such transfers, told Kathimerini.

 

In contrast to the widespread belief that those first businesses moved in order to reduce operating costs, Adamidis said their motives were more about increasing profits, with Greek construction firms today leading the market for big infrastructure projects in Bulgaria.

 

Translation from the story is not necessary as this is the English version and the meaning of this course of action is spelled out in the  following sentence as the harsh reality of socialism gone wild continues within a collapsing system:

 

“These are not companies that have gone bankrupt,” he explained. “But the red tape and especially the unclear tax system have put businesses in flight mode.”

 

The justification for these corporate relocation programs to neighboring Bulgaria sound vaguely familiar, like the information executives gave during hearings in the United States Congress years ago when they were grilled about moving their headquarters to the Bahamas.

 

This now begs the question; what capital controls have been introduced? The newspaper Protothema highlighted the crisis in this story today:

 

“Borders are closing” for those who wish to take their money abroad

 
Sounds like capital controls are in force based on the headline alone, right? The article highlights a circular being distributed by the Greek Treasury to enforce the restrictions on large flows of capital out of the country. This portion of the story spells out the regulations that have been implemented to stop capital flight:


With a circular already sent to tax offices, the Treasury is instructing its agents on barriers to be raised against anyone who seeks to transfer their tax base abroad.

More specifically, the circular states the following:
 
-          those submitting a transfer statement of their tax base to the 47 “uncooperative” tax countries (Cayman Islands, Gibraltar, Uruguay, etc.) remain mandatory tax residents of Greece, which means they will be taxed on their worldwide income in Greece

 
-          those who submit a declaration of tax residence transfer to countries where there is no tax on income must meet a series of conditions for the Greek tax authorities to accept the request. For example, if a taxpayer acquires at least 30% of his income in Greece, he should be taxed in our country too. The same will apply if the total income derived in Greece exceeds 50,000 euros per year

 

-          if a taxpayer declares that he will move to a country with which there is a contract for the avoidance of double taxation of income (i.e. not getting taxed on the same income twice but only in one of the two countries), then the tax office should raise the issue of the double residence. Here the Treasury will contact the foreign tax authority to decide who will tax the taxpayer

 

The directive of the ministry now is that a mere disclosure of the taxpayer’s intent to make a change of residence “should not automatically imply a change of residence.”

 

Treasury Secretary George Zanias appears to have engaged in the implementation of these capital controls during the void in leadership due to the upcoming elections. As this process continues and expands to lower and lower amounts of Euros the average citizen or businessman is allowed to transfer out of the nation, the economy will come to a screeching halt. It is my hope every American watches this process as de facto capital controls are already in effect in the United States effective January 1, 2013. Prepare to witness an economic carnage unseen by the majority of us in our lifetimes and much worse than the 1930′s Great Depression.

 

Tags: , , , , , , , , , , , , ,

2 Responses to Report from Greece: Limited Capital Controls Implemented

Gold/Silver/Dollar Charts

FROM JOHNGALTFLA TWITTER FEED

RT @AJELive Lithuania, Poland and Ukraine to form a joint brigade intended to modernise the Ukrainian army confronting rebels. aje.me/XRE8Kb

About 2 hours ago from johngaltfla.com's Twitter via Twitter for Android

Galt Chat

LOADING...

Contact Links:

Questions, comments, news tips email me at:

johngaltfla@yahoo.com


Business related questions, comments at:

john@johngaltfla.com

DMCA Policy

Here at JohnGaltFLA, I, aka, me, myself, etc. does everything they can to respect the rights be it "fair use" or creative works however, some people object. If you have a complaint under the rules of the DMCA(look it up yourself lazy one), then please email me a the address below:

john@johngaltfla.com

%d bloggers like this: