Speaking before a Parliamentary Committee processing his draft tax bill, Finance Minister George Papaconstantinou on Wednesday countered criticism that the penalties this envisions for tax-dodgers were too harsh. The finance minister stressed that, on the contrary, the previous system had given tax payers absolutely no incentive to be honest.

"The requirement to combat tax evasion concerns saving the country and is a matter of social justice," he underlined during the debate on the individual articles of the draft bill.

"The older regime not only did not avert tax evasion but encouraged it. For someone owing 10 million euro, the penalty provided today is up to one year in prison. The highest penalty that a court can impose is five years, suspended for three years. The debtor pays 82,400 euro and is done," Papaconstantinou pointed out.

The older system had given tax-payers no incentive to conform to the rules and, in this way, some 35 billion euro in overdue debts had accumulated that could not now be collected, the minister added.

The non-payment of VAT due to the Greek state amounted to "embezzlement of money from the public sector that comes to several points of GDP," he underlined and rejected arguments that businesses should be able to use sums owed as VAT as capital for the businesses "catastrophic".

He also denied that the penalties proposed were excessive or "out of proportion", pointing out that crimes such as fraud, embezzlement or theft for similar or smaller amounts bore much harsher penalties than those proposed.

"On the contrary, tax evasion offences remained unjustifiably penalty-free and the view was established that systematically cheating the public sector of VAT helped markets and was fair," he noted.