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I read that and responded to him like so:

I think the overspending story is overhyped, but so is the tax evasion story. In order to look at Greece's 25% tax evasion as the problem, you need to put it in context. Greece is at 25%, the Eurozone is at 20%, the USA is at 17%, so even if Greece did better on collection, you can't assume it would go from 25% to 0% as so many have.

The vast majority of the money is lost due to political corruption. Greek tax revenue per capita is $12.7k in US dollars (108 billion euros in tax revs divided by less than 11 million people) which compares to $8.6k in the USA. Greek per capita GDP is also a lot less than in the USA. Conclusion: Greeks pay more taxes than Americans in REAL money though they earn less. Tax evasion is simply a measure of tax that SHOULD have been paid but wasn't, and when you take into account the many variables country to country (i.e. differential tax rates) it's impossible to compare rates of tax evasion. In some countries you can have a very low tax rate (for instance, 15% capital gains in the USA) that allow people to LEGALLY avoid taking a big tax hit. The important thing to really look at is per capita tax revenue, because that tells you about relative taxation, especially when you're comparing small countries like Greece that are loaded with mom-and-pop small businesses, countries that have a VAT tax that tends to drive taxes underground, against countries with huge multinational corporations.

It's too simplistic to look at Greek tax evasion (at 25%) and say, well, they are losing $30 billion a year in tax revenue.

There seems to be a professional class in Greece that ignores its responsibilities, but nonetheless, someone is paying tax revenues for them to reach $12.7k per capita. The biggest economic sector in Greece is shipping, and shipping profits are totally untaxed for obvious reasons (ships can register anywhere) though there is a tonnage tax. It could be that employees in the shipping companies receive non-salaried compensation that is then taxed at some other rate, and this would explain why there are so few declared high salaries in Greece. Otherwise, I'm at a loss to explain the tax revenue per capita rate unless it ALL falls on the middle class.

The Brookings Institution did a study that showed Greece would have a surplus were it not for corruption.

by Upstate NY on Tue May 25th, 2010 at 06:15:30 PM EST
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