Taxes

Greeks Are Good at Dodging Taxes, But the Greek Government Is Better at Spending

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It turns out there's something Greece is actually good at.

Riffing off a new research paper, Justin Lahart at the Wall Street Journal has some interesting data on the truly vast, indeed, awe-inspiring degree of tax evasion that Greeks have accomplished in recent years. Even more impressive, if the Greek government had scooped up every euro it coveted, it would still be broke.

Writes Lahart:

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.

Not mentioned in the article, but buried in the paper itself is the datum that "We fi?nd that on average the true income of self-employed is 1.92 times their reported income." So Greeks with the means to do so are underreporting their income by almost half.

Predictably, Brad Plumer, writing in Ezra Klein's little romper room for the criminally insane at the Washington Post, blames much of the world's economic woes on these tax-averse nibblers of grilled octopus.

The euro crisis first started roaring in late 2009, when auditors inside the newly elected Greek government discovered that the country had a much—much—bigger deficit than anyone realized. …

But why did Greece have such a massive budget deficit in the first place? One factor (among many) was rampant tax evasion, which had starved the Greek government of funds.

But remember Lahart's point above that uncollected Greek taxes represent "nearly a third of Greece's budget deficit." That means, if the Greek government had collected every bit of that evasive lucre, it still would have overspent by roughly €20 billion. Even if we accept Plumer's seeming assumption that government spending levels are fixed by natural law, and it's up to us mere mortals to keep up, Athens would still be circling the drain if its subjects were the most compliant feeders-of-the-beast to ever live.

Under the circumstances, stashing as much cash as possible out of sight of the ruling lunatics sounds like the equivalent of hiding the bottle from a falling-down drunk. And if the earners of that money benefited in the process of trying to dry out the state, so much the better.

You can read the full paper here (PDF).

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  1. Semi OT:

    Krugnuts got completely PWNED this weekend During a debate on Europe’s crisis by one Pedro Schwartz (a mild-mannered Spanish ‘Austrian’ economics professor).

    Krugnuts looks like he needed several extra glasses of chardonnay to settle down after this ass whooping.

    Good times.

    http://www.zerohedge.com/news/…..-take-down

    1. Calling Krugnuts an economist is a serious insult to economists.

      1. Yeah, this is the intellectual equivalent of Mike Tyson in his prime beating up a ten year old.

    2. That was awesome.

      I thought Krugnuts was going to start crying there around the 49m mark.

    3. “… by France because they’re always asking for something that’s not right”

      Hahahaha

    4. Paulie sure got his panties in a bunch, no?

      1. “Keynesians got us into this mess and now we have to sacrifice our principals so that they can get us out of this mess.”

        BA BOOOOOOM!!!! You can see Krugnuts practically wet himself over that one.

        1. Schwartz shoulda kicked Krugman in the balls with the explanation that he’s trying to stimulate the economy by increasing demand for medical treatment of kicked balls.

  2. I’m surprised Reason’s RT sluts haven’t gotten on this yet:

    In explaining the order, the Electronic Privacy Information Center (EPIC) writes that the president has authorized the DHS “the authority to seize private facilities when necessary, effectively shutting down or limiting civilian communications.”

    http://rt.com/usa/news/obama-p…..tions-770/

    1. Dog bites man?

      1. Dude, it’s not Bush, who would have used this to censor people who were dissenting (the highest form of patriotism).

  3. You just hate black people JD and have no understanding of how economics REALLY works.

    /brain dead progressive

  4. People struggling not to be stolen from are not the problem here.

  5. I wonder whether there would be a lot of doctors or engineers left in Greece, if they DID have to pay taxes on their full income.

    1. There probably would be less of them, which would allow them to charge higher prices…fucking morons don’t realize the money train they’re passing up.

      Maybe the AMA could do some Protectionism Rent-Seeking 101 seminars in greece.

      1. Could they charge enough extra money to make up for the extra taxes they’d pay, in an economy with no high earners?

  6. The thing I most appreciate about the Greek collapse is how it’s all embodied in the geography of the country, a mass of land breaking up and dissolving into the Aegean and Ionian seas. It’s like if Canada ejected Newfoundland from the commonwealth, the vomiting mouth of Quebec’s Gulf of St. Lawrence would satisfy any cartographic characterizer.

  7. How dare people try to resist being stolen from! Such gall!

    1. I say!

      1. “My caddy’s chauffeur informs me that a bank is a place where people put money that isn’t properly invested.”

        1. “Whereas I have a ham dinner with mayonnaise waiting for me at my mansion, I find the defendant guilty.”

          1. “The only poor people I want to hear about are the people who clean my pores at the spa!”

            1. “Your Honour, that facility has been full ever since you ruled that being poor is a mental illness. “

    2. I bet you don’t leave your car windows down at night to make it easier for the economically deprived to avail themselves of your stereo, either.

  8. Athens would still be circling the drain if its subjects were the most compliant feeders-of-the-beast to ever live.

    That title goes to us.

    Woo hoo! USA! USA! USA!

  9. But why did Greece have such a massive budget deficit in the first place? One factor (among many) was rampant tax evasion, which had starved the Greek government of funds.

    Absolutely!

    It’s just plain crazy to think that government spending should be limited to the revenue they raise.

    1. No kidding. It’s not as if tax evasion was some new thing. Like the revenues just started vanishing when Greeks realized what they could get away with. Methinks that this goes back a long time. So this whole “evasion” issue has had zero impact on the long term revenue trendline.

      1. It’s the same as socialists in CA whining that prop 13 is the cause of multi billion dollar deficits.

        Cause, ya know, 37 years just isn’t enough time to figure out your finances, or something.

        1. And of course they ignore the fact that Prop. 13 passed in the first place because people were losing their homes due to skyrocketing property taxes, so their argument amounts to: “If only we had been taxing people out of their homes for 37 years, our budgets would be balanced!”

  10. I wonder how much this depends on the assumption that Greeks are telling the truth to their banks. Sounds fishy. Anyone read this?

  11. Fuck these people, Greek style.

    I remember some whiny assholes complaining that if only they’d tax peoples swimming pools everything would be rainbow farts and fairy semen. They deserve to drown in their own filth.

  12. “Predictably, Brad Plumer, writing in Ezra Klein’s little romper room for the criminally insane at the Washington Post”

    ouch!

  13. Expecting the government to collect stale imperfect data, predict the future, and apply the proper correction before it too becomes dated, is like the cat that thinks you can get its food faster if it walks between your legs. The cat, and the government, need to just get out of the way.

  14. Predictably, Brad Plumer, writing in Ezra Klein’s little romper room for the criminally insane at the Washington Post, blames much of the world’s economic woes on these tax-averse nibblers of grilled octopus.

    Tell us how you really feel, Nick.

    But why did Greece have such a massive budget deficit in the first place? One factor (among many) was rampant tax evasion, which had starved the Greek government of funds.

    I like that. I like that a lot. Those pesky villagers kept running away and hiding, starving the cannibals of precious nutrients.

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