Fri Jul 10th, 2015 at 05:07:56 AM EST
In July 2012, a paper titled Tax Evasion Across Industries: Soft Credit Evidence from Greece was published by Nikolaos T. Artavanis of the University of Massachusetts at Amherst, Adair Morse of Berkeley's Haas School of Business, and Margarita Tsoutsoura of the University of Chicago's Booth School of Business.
The paper was referenced by The Wall Street and in turn by The Washington Post that summarizes:
Comparing bank data with government data, the authors found that the true income of the average Greek person is about 1.92 times larger than what's actually reported to the government. In 2009, that shrunk the tax base by about $34 billion. Assuming that money was taxed at a 40 percent rate, that's 31 percent of the country's budget deficit in 2009 right there.
The paper also contains a map:
... showing the top zip codes that avoid taxes in Greece. Note that it's not just limited to Athens; the authors found that Greek tax evasion is rampant everywhere, and prevalent across all income groups. (The circled area is Larissa, which, depending on what hearsay you believe, may or may not have a suspiciously high number of Porsche Cayennes registered.)
Finally, a theory is provided as to why such egregious tax evasion could not be stopped:
The authors note that Greek officials seem to have a very good idea of who's avoiding taxes: In 2010, the parliament took up a bill that specifically targeted doctors, dentists, lawyers, architects, engineers and so forth. As the authors note, these are precisely the groups evading the most taxes (largely because they receive much of their income in bribes). But the crackdown bill failed -- possibly because, as the authors discover, these are the professions best represented within the Greek parliament.
Of all the criticisms laid on Greece, the one of tax evasion strikes me as the most important, because it makes it so much easier to have less sympathy for the Greek people in general, and not only their incompetent and corrupt leaders. So I wonder:
- Has the problem of tax evasion been significantly worse in Greece among hoi polloi (not the rich and powerful) than in other developed countries (in particular Eurozone countries)?
- If so, is it possible that around 31% of Greece's budget in 2009 was due to this tax evasion?
- Besides demanding higher taxes, have Greece's creditors also demanded concrete plans to improve tax collection?
- What, if anything, has the Greek government or Syriza proposed to address the tax evasion issue?
Regarding the fourth question, apparently there was some response by the government in 2012 to the paper:
Assistant Professor Adair Morse received the 2013 Best Empirical Finance Paper Award at the Western Finance Association Meeting for an article on Greek income tax evasion that attracted significant media coverage and helped shape tax policy. ... Morse shared the award with her co-authors, Margarita Tsoutsoura of the University of Chicago Booth School of Business and Nikolaos Artavanis of the University of Massachusetts, Amherst.
"Their work has received unprecedented media coverage and has already ushered in significant changes in the Greek tax policy," Wharton Research Data Services wrote in announcing the award, which was presented at the Western Finance Association conference in June.
The trio's widely cited paper, "Tax Evasion Across Industries: Soft Credit Evidence From Greece," examined Greek income tax evasion, banking, and credit. Morse and her co-authors found that wide-scale tax evasion in Greece accounts for at least $28 billion Euros in unreported taxable income - just among the self-employed. Using bank data on household borrowing from 2003 to 2010, they found that highly paid, highly educated professionals are at the forefront of tax evasion in Greece, including doctors, engineers, private tutors, financial services agents, accountants, and lawyers. ...
The researchers infused this new insight with the observation that Greek banks have learned to adapt to an economy where income is often hidden to remain competitive.
The team's research was presented in Greece in September 2012 and already the Greek government is making policy changes in response to it. The Greek government has decided to eliminate tax-free income and is shifting to a model in which professionals carry some of the burden of proof of not having hidden income. ...
Morse Honored for Research on Greek Tax Evasion
August 12, 2013
"is making policy changes"
"is shifting to a model"
So what has changed in fact rather than just in words and intentions since then (assuming the Greek evasion issue is indeed a mountain and not a molehill)?