Greek nightclub basements turn focus of tax-evasion dragnets

It’s Saturday night going on Sunday morning at a club near the gated homes of the Greek elite in northern Athens as two men and a woman in business suits push through the crowd and demand to see the cash register.

The manager sighs. It’s the tax man.

The inspectors are the new face of Greece’s fight against an age-old problem of tax evasion. Their mission: to check whether the club has given customers automated receipts that allow officials to track sales. In Greece, clubs, bars and restaurants have often avoided that paper trail to understate their revenue and reduce income and sales-tax payments.

As the country capitalizes on its first bond sale in four years and weans itself off 240 billion euros ($331 billion) in international loans, the authorities still must prove they can collect enough taxes to survive without aid. Even performing the most basic of state duties means overturning a tax-dodging culture rooted in centuries of occupation by Ottoman Turks followed by decades of apathy by the Greek state.

“Our controllers have gotten chairs thrown at them,” Hara Mavridou, Greece’s deputy general director of tax audits and public-revenue collection, said in an April 8 interview in her office in downtown Athens. “We want to be tough with those who break the rules and we want a light touch for those who follow the rules to encourage them.”

History and politics

The scale of the shadow economy illustrates the potential for Greece to transform its finances by clamping down on tax evasion. Undeclared activity was 24 percent of output in 2012, compared with a European Union average of 15 percent, and concealed work averaged 25 percent between 1995 and 2006, the EU says. Even...