Distributional implications of tax evasion in greece lse research. For the first time we develop a time series of tax evasion in % of official gdp for 38 oecd countries over the period 1999 to 2010 based on mimic model estimations of the shadow economy. When people think taxes are unjust, which generally means a government out of control, taxing mainly for personal gain either for money or to keep power. Greece is currently implementing an ambitious, euimf financed, fiscal adjustment programme, the socalled economic adjustment programme eap. It is worth mentioning that several researchers, instead of the term tax evasion, use the most neutral term, tax noncompliance. Overview, policy responses, and implications congressional research service 1 introduction since early 2010, the eurozone has been facing a major debt crisis. Tax evasion in greece is estimated to be between 11billion euros and 16 billion euros annually, a study has found. We argue that this has been the result of the arbitrage that firms face when choosing to declare their activity.
Size and development of tax evasion in 38 oecd countries. Tax evasion in greece if i could get everyone in this room to pay their taxes, i wouldnt need to be here. The purpose of this study is to examine the level of tax evasion of greek small and micro firms and how it is affected by the inefficiency of the public administration, the negative economic environment and various negative psychological factors. G department of accountancy, osun state college of technology, esaoke, nigeria abstract. The austerity plans implemented in greece in 2010 have yielded lower than expected increases in tax receipts. Recent amendments in greek tax legislation kpmg greece. Reducing tax evasion has been among the top priorities of the greek public administration especially during the last years of the economic recession. A bigger question is why greece hasnt been able to crack down on tax evasion. This study was designed to identify the effects of tax evasion on government revenue generation in oyo state. The main aim of the study is investigating factors that have a detrimental effect on tax evasion in ghana. This paper is an attempt to analyse empirically the implications of tax evasion in terms of inequality, poverty, redistribution and progressivity of the income tax system in greece. So muttered a member of the troika last year, in a room filled with greeces great and good.
Either there should be similar articles about tax evasion in other countries, or this should be removed. Tax evasion is an activity commonly associated with the informal economy. London if i could get everyone in this room to pay their taxes, i wouldnt need to be here. Moreover, many citizens do not directly violate tax legislation, but avoid paying taxes by taking advantage the lack of explicit legislation. New greek regulation designed to fight tax evasion problem.
Even though tax evasion has been the focus of a growing volume of research in recent years, the issue of its distributional impact is still relatively neglected. Tax ethics, tax evasion, auditing, accounting, greece. Portugal and greece, which are consistently above the eu28 mean in each. As discussed in the next section, in all three countries the informal economy is widely held to be very extensive, accounting for between onequarter and onethird of official gdp. Now, the tax base in new zealand comprises both direct and indirect tax systems. Greece cracks down on longtime tax evasion problem. Tax crimes handbook office of chief counsel criminal tax division 2009. Distributional implications of tax evasion and the crisis. Along those lines, tax ethics forms a personal constraint which regulates the way citizens behave regarding the payment of taxes. Lessons from greece on tackling tax evasion world economic. Jun 01, 2007 informal economy, tax evasion, and poverty in a democratic setting. The problems of the shadow economy, tax evasion and tax avoidance are considered as a plague for.
Vat deficit estimated at 34% due to tax evasion, tax avoidance and ineffectiveness in the tax collection mechanism. The study prepared by ey and commissioned by the dianeosis thinktank was presented during an event hosted by the institute and the federation of hellenic enterprises sev, greece s largest employers group. Tax deficiency can arise by operation of law when there is a failure to file and the government later determines the tax liability. Tax evasion and reforms in greece vox, cepr policy portal.
Our results corroborate the evidence of increasing levels of tax evasion during these consolidations and point to signi. Distributional implications of income tax evasion in. Introduction since the seminal papers of nordhaus 1975 and hibbs 1977, a great deal of effort has been devoted to understanding the distortions elections can impose on an economy. This column discusses the impact of recent tax administration reforms on tax compliance in greece. So muttered a member of the troika last year, in a room filled with greece s great and good. Tax evasion in greece the full study pdf, in greek tax evasion is one of the most important problems facing any democratic state. In greece, many are those who assert that tax revenues of hundreds millions of euro a year are lost by the greek government from illegal activity such as in fuel trading, arguing that tax evasion. We use microdata on household credit from a greek bank, and replicate the bank underwriting. Tax authorities rely on random audits to estimate the tax gap, that is, the total amount of unreported income and unpaid taxes e. How greek tax evasion helped sink the global economy the. Elenxis, an effective tool for the war against tax avoidance. One measure of the extent of tax evasion the tax gap is the amount of unreported income, which is the difference between the amount of income that should be reported to the tax authorities and the actual amount reported.
Evasion shou ld also be curtailed by the creation of a unique employment and social. One of the goals of the eap is to boost revenue performance by tackling tax evasion through improvements in tax administration. Chapter 8 tax avoidance and tax evasion iarc publications. T he new government of greece, led by alexis tsipras, has promised to tackle tax evasion. Distributional implications of tax evasion and the crisis in greece.
There are reports that as much as 30 billion euros. Tax evasion and corruption in greece project gutenberg. February 28, 20 by ruth levush the following is a guest post by my colleague, theresa papademetriou, who is the law library of congress senior foreign law specialist for the european union, greece, and cyprus. May 06, 20 greece not tough enough on rich tax evaders, imf says this article is more than 6 years old tax evasion by the wealthy and selfemployed is leaving those on salaries and pensions to bear brunt of. Understanding the causes of tax evasion calls for research into taxpayers reasons for evading taxes. Distributional implications of tax evasion in greece lse. Why is tax evasion such a refined practice in greece. The problem of tax evasion in greece has been pointed out many times during the debt crisis. Hence, in order to reduce the public debt to gdp ratio, a rationalization of both public expenditure and taxation is required, so that wasteful expenses are cut and the theoretical tax revenues coincide with the e ective ones, i. Pdf on jan 1, 2018, george drogalas and others published tax ethics and tax evasion, evidence from greece find, read and cite all the research you need on researchgate. Greece not tough enough on rich tax evaders, imf says.
In this paper, we develop a new method to estimate tax evasion and its incidence. In an effort to attract high net worth individuals, an alternative taxation on foreign source income earned by individuals andor their relatives who transfer their tax residence to greece is introduced, if the following conditions are cumulatively met a the individual was not a greek tax resident for the 7 out of 8 years preceding the transfer of his tax residence to greece and b can. We compare a large panel data sample of personal income tax returns in 20062010 incomes earned in 2005. Pdf distributional implications of tax evasion in greece. High tax rates make greece s debt problem even worse. Feb 24, 2015 t he new government of greece, led by alexis tsipras, has promised to tackle tax evasion.
The literature focuses on two particular forms of tax evasion for individuals. We then analyze the response of the economy to tax hikes in a stylized model where firms adjust the share of their declared activity. Greece struggles to address its tax evasion problem. This paper aims to bring into surface two major socioeconomic problems of greece, tax evasion and shadow economy. Tax evasion in greece between 11bn and 16bn annually. Mar 31, 2015 greece cracks down on longtime tax evasion problem greeks dont trust their own state to give them good services, so for decades they have evaded taxes. The paper attempts to shed light on one aspect of the phenomenon, namely its distributional implications. The paper finds that the effects of tax evasion are higher income inequality and poverty, as well as lower progressivity of the income tax system.
Tax evasion is defined as any unlawful act or omission which results in the avoidance of the payment of any relevant tax liability. High tax rates make greeces debt problem even worse. Spyros skouras and nicos christodoulakis electoral. Greece s governor of the independent public revenue authority issued, on 20 december 2017, circular pol. Evidence from wildfires and tax evasion evidence from wildfires and tax evasion in greece and elsewherein greece and elsewhere 1. Billions earned by highincome professionals go untaxed 18 december 2012 widescale tax evasion in greece accounts for 28. How tax evasion is complicating greek rescue efforts the. This paper is an attempt to analyse empirically the implications of tax evasion in terms of inequality, poverty, redistribution and progressivity of the income tax system in greece, hungary and italy three countries featuring an.
The aim of this paper is to provide preliminary estimates of the size and distribution of income tax evasion in greece, hungary and italy. Fiscal consolidation with tax evasion and corruption. Greece struggles to address its tax evasion problem world. Distributional implications of tax evasion in greece. We conclude with evidence that contemplates the importance of institutions, paper trail and political willpower for the persistence of tax evasion. In greece, tax rates in all categories are among the highest in europe, with tax.
Denmark, estonia, finland, france, germany, greece, hungary, ireland, italy. Central aim of the paper is to analyze the reasons why paying taxes in greece makes someone an irrational actor. Pdf tax evasion in small and micro greek firms in the. Tax evasion was described by greek politicians as a. Pdf on jun 1, 2012, manos matsaganis and others published the crisis and. Tax evasion in small and micro greek firms in the light of the economic recession. The main failure of the tax system in greece is that it reproduces tax evasion and overdue debts of established taxes, distorting the real. Upon what scientific, objective, or statistical basis was greece chosen for such an article and not other countries. Personal income taxes have been reduced, accompanied by measures to curtail tax and social security evasion. Tax evasion is top of the list of reforms, george papandreou, prime minister, said in a speech to the brookings institution in washington in march.
Jul 09, 2012 how greek tax evasion helped sink the global economy. Considering indirect taxation and selfemployment as the driving forces of tax evasion, we observe a declining trend of tax evasion between 1999 and 2010 for all countries. Greek tax authority revises definition of tax evasion crime. Introduction when there is an income tax, the just. This has adverse effects in terms of horizontal and vertical equity, as well as in terms of efficiency. Measuring income tax evasion using bank credit citeseerx. This observation leads to a novel approach to estimate tax evasion.
Tax morale and international tax evasion sciencedirect. Jul 01, 2015 early attempts to use economic theory to model tax evasion suggested it was a simple matter of people balancing the potential benefits of pocketing extra money owed to the taxman against the. Yes, greece has a serious tax evasion problem quartz. Greece has a lot of financial problems to address, but a key one is its broken tax system. Pdf distributional implications of tax evasion and the. Tax evasion in greece in flagrante free exchange the. In greece, tax rates in all categories are among the highest in europe, with tax collection remaining close to the average or even lower. In their research, estimated that the rate of tax 3. Pdf tax ethics and tax evasion, evidence from greece. The intensification of audits, enforcement of penalties, and efficient collection of past debts can induce tax compliance and raise the collected revenue. We take advantage of access to a large sample of income tax returns in 200405, and compare tax reported incomes with those observed in the household budget survey of that year.
A high tax wedge on labour income hampers employment creation, and encourages tax evasion and informal activities. In ghana, one of the many problems facing tax administration is tax evasion 9. Tax evasion is defined as the illegal avoidance of paying taxes, e. Greece s director of independent public revenue authority issued a decision pol 12092017 that contains supplementary guidance and clarifications regarding the concept of tax evasion in income taxation. Tax evasion and political corruption exist in greece.
We use microdata on household credit from a greek bank, and. Effects of tax evasion on government revenue generation in oyo state, nigeria folayan d. Once unjust taxes are being imposed people will consider tax evasion when the cost and risk. Estimating international tax evasion by individuals european. Evidence from greece nikolaos artavanis, adair morse and margarita tsoutsoura september 25, 2015 abstract we document that in semiformal economies, banks lend to taxevading individuals based on the banks assessment of the individuals true income. A tax hike has a direct effect on the degree of tax evasion, and an indirect one through credit markets. Empirical data and related research are used to provide a clearer view of the existing situation. Dec 18, 2012 widescale tax evasion in greece accounts for 28 billion euros in unreported taxable income just among the selfemployed, according to a new study, tax evasion across industries. Tax evasion in small and micro greek firms in the light of. The unprecedented tax hikes implemented in greece in 2010 generated a much lower than expected increase in tax revenues. If the cost of evasion and avoidance depends on other aspects of behavior, the choice of consumption basket and avoidance become intertwined. The shadow economy and tax evasion are both widespread in greece. A more recent study considering indirect taxation as the driving force of tax evasion and making some bold assumptions estimates tax evasion in greece at 1.
Tax evasion involves the deliberate act of noncompliance to tax legislation and the disregard of tax payments from the citizens. Distributional implications of income tax evasion in greece. Greece is currently implementing a fiscal adjustment programme aimed at tackling tax evasion. Tax evasion is rampant due to lack of appropriate monitoring strategies in tracking tax revenues from tax officials and taxpayers. Supplementary guidance and clarification on the concept of income tax evasion crimes. The guidance is expected to have a significant impact on the market, as it reduces the scope of application of i the 20year statute of limitation, which applies in the event of tax evasion and ii legal provisions on criminal liabilities of bod members of greek corporations. Tax evasion is greece s national sport, some of the countrys politicians say. Informal economy, tax evasion, and poverty in a democratic. Transparency international stated in 2012 that corruption had played a major role in causing the greek financial crisis although the crisis itself was triggered by the global financial crisis of 20072008, and greece s economy had fared well for most of the period up to the aforementioned crisis. In all of wikipedia, only greece and the united states are singled out for articles about domestic tax evasion. It examines the determinants and the factors that led to the formation and. In this paper, we document a new stylized fact explaining this gap.
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