Tuesday, July 10, 2012

Greeks Are Good at Dodging Taxes, But the Greek Government Is Better at Spending

by J.D. Tuccille

Reason

July 10, 2012

Riffing off a new research paper, Justin Lahart at the Wall Street Journal has some interesting data on the truly vast, indeed, awe-inspiring degree of tax evasion that Greeks have accomplished in recent years. Even more impressive, if the Greek government had scooped up every euro it coveted, it would still be broke.

Writes Lahart:
Armed with data from one of Greece’s ten largest banks, economists Nikolaos Artavanis, Adair Morse and Margarita Tsoutsoura recently set themselves to the task. The banks, with tens of thousands of customers across the country, provided loan and credit-card application and performance data. That not only gave the economists access to self-reported incomes, but also allowed them to infer the banks’ estimates of true incomes — which are likely closer to the mark.

The economists’ conservatively estimate that in 2009 some €28 billion in income went unreported. Taxed at 40%, that equates to €11.2 billion — nearly a third of Greece’s budget deficit.

Why hasn’t Greece done more to stop tax evasion? The economists were also able to identify the top tax-evading occupations — doctors and engineers ranked highest — and found they were heavily represented in Parliament.
Not mentioned in the article, but buried in the paper itself is the datum that "We find that on average the true income of self-employed is 1.92 times their reported income." So Greeks with the means to do so are underreporting their income by almost half.

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