Taxing Greeks: Separating Reality from Fiction

This terse article gives us a glimpse of the mechanics of how wealthy Greeks has successfully been able to avoid paying taxes

From the Wall Street Journal Blog,

That Greeks have a penchant for evading taxes isn’t exactly news — when tax collectors started comparing swimming-pool ownership with incomes, wealthy Greeks camouflaged their pools. And because hidden income is hidden, figuring the size of the tax dodge is difficult.

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.

It’s always easy to portray the solution to fiscal problems, through statistical estimates, as merely one of enforcement procedures of tax policies.

Unfortunately, such simple minded approach escapes the premises of people’s reactions to repressive social policies and to the parasitical relationships which underpins their political institutions.

As for some of the professional Greek elites, as noted above, their tax shields may have been derived through their participation in the political hierarchy.

Mainstream economists seem to forget that they are dealing with real people, who by nature will look after their interests by adapting to the realities of the evolving political economic environment.

And it is for this reason why top-down or centralized policies inherently fails.