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How big do you think Greek tax evasion is?

It's at 25%.

Now, assume that if Greece were like every other European country, it only had 20% tax evasion.

Well, let's look at its tax collection. It's at 140 billion. 5% of that is 7 billion. That's not enough to cut into a 350 billion deficit. We've only accounted for 2% of a 11-15% yearly budget deficit.

Taxes should be reformed in Greece BECAUSE they are unfair to those who pay. But from a macro perspective outside Greece, here are the numbers reported by Eurostat for the last decade:

Greece collects between 40-43% of its GDP annually. The EU collects 44%.

In Greece, 8% of GDP is collected as income tax revenue. 12% social contributions. 5% corporate. 16% VAT and sales tax.

The actual rate of tax collection in Greece is on par with tax collection in Europe. In fact, I would argue that in Greece, tax collection actually exceeds that of most of Europe when you take into account two factors: Shipping and Tourism. Those two industries account for almost 40% of Greek GDP. Tourism is cash heavy, and outside of using credit cards, I'd imagine its an industry with high evasion. Shipping revenues and profits are untaxed precisely because the ships can register in any port, under any flag. The ship owners pay a tonnage tax for the weight of ships only. So here with shipping we account for 20% of the nation's GDP, but for hardly any of the country's taxes. This literally means that when you back out shipping, the GDP subject to tax is smaller, and thus the % of tax to GDP collected is much higher.

To roll back high tax evasion of high taxes would be a very good thing for Greece, but not a solution. After all, high tax evasion of high taxes already yields more revenue than the low tax evasion of low taxes. In the USA, we have hedge fund managers who pay 15% on earnings.

by Upstate NY on Thu Jun 16th, 2011 at 04:33:31 PM EST
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