Associations representing small businesses and traders strongly criticised the government's draft bill to combat tax evasion on Tuesday, telling a Parliamentary committee that the bill ignored the current state of the economy and essentially made it a criminal offence to fail in business.

"The bill spreads a bureaucratic spider's web that will act as the womb for a new class of graft, which will maximise the lack of options for thousands of businesses. No progress is made in the direction of speeding up the repayment of state sector debts to private individuals. The public sector will delay a year and a half, while anyone owing VAT will face the threat of imprisonment if they delay a month," stressed Dimitris Asimakopoulos, head of the small manufacturers and traders association GSEBEE.

Describing the difficult conditions that small and medium-sized businesses now had to contend with, Asimakopoulos said that a business owner faced between paying his staff and suppliers or paying his VAT would prefer to first pay off the former in order to keep his business going.

He welcomed a measure that would offset any taxes due to be paid against VAT rebates due but stressed that tax inspections should not delay longer than two months and their timing should not be at the discretionary power of tax officials.

According to the National Confederation of Greek Commerce (ESEE) president Vassilis Korkidis, the draft bill "was out of touch with reality" and putting business people in prison would not help to raise any more taxes. Part of the problem, he added, were the exceptionally high tax rates for businesses in Greece, which ranged from 58 percent for small businesses to 62 percent for large ones.

Other criticism against the bill came from tax officials, who objected to the introduction of a bonus for achieving targets and called for other incentives.

The draft bill now before the Parliamentary committee introduces much stiffer penalties that include imprisonment for those that conceal earnings or fail to pay taxes that are due. A tax-payer might go to prison for anything up to a year for failing to pay overdue taxes between 5,000-10,000 euros. Similarly, concealing between 15,000-150,000 euro in income carries a minimum prison sentence of one year, while for sums in excess of 150,000 euro the penalty can range from five to 20 years imprisonment.

The bill also changes the way that tax offences are treated in the legal process, with a public prosecutor now given powers to remand an offender in custody for up to one third of the time before the offence becomes statute-barred and, in serious cases, to bypass administrative courts and go straight to a criminal trial.