Thursday, September 20, 2012

Greek Tax Evasion in 2009: €28 Billion - Austerity Package 2012: €11.5 Billion

Posted by keeptalkinggreece in Economy

Greek Tax Evasion in 2009: €28 Billion – Austerity Package 2012: €11.5 BillionIt looks as if the total amount of uncollected taxes, included the Value Added Tax, in 2009, is more than twice the amount of austerity measures Greece needs to take in order to receive the next trance. That was the result of an academic research published a week ago.

Uncollected taxes 2009: 29 billion euro

Austerity package (2.bailout): 11.5 billion euro

Bailout tranche: 31 billion euro

This is the result of an academic research conducted by two economists at the University of Chicago and one academic from Virginia Polytechnic Institute. According to the survey, tax evasion in 2009 only, reached in Greece 28 billion euro. 

“Leading in tax evasion are self-employed professional groups like doctors, engineers, teachers, accountants, consultants and attorneys. Concerning employees, the list is led by media people, and freelancers at tourism and restaurant sector.”

The research leads to a very interesting conclusion: the weakness or indifference of the state apparatus in identifying hidden income related to the fact that the majority of Members of Parliament belonging to the Greek five occupations are champions evasion.

Broader attempts to crack down on the professions were blocked last year by the Greek parliament. MPs voted against a bill mandating tax audits on people who had incomes below a minimum threshold. The bill targeted 11 professions, including vets, architects, engineers, economists, doctors, lawyers and accountants.

They said: “Half of non-lawyer parliamentarians are in the top three tax-evading industries, and nearly a super-majority in the top four evading industries.”

The survey is based on data collected by Greek banks and it’s an in-depth study of how Greek banks, politicians and professional workers behave.

Primary Greek Tax Evaders are Professional Classes

Interestingly, their report, Tax Evasion Across Industries: Soft Credit Evidence From Greece, which documents the hidden, non-taxed economy, blames the current malaise not on dodgy taxi drivers or moonlighting refuse collectors, but on the professional classes.

They found that €28bn (£22.4bn) of tax was evaded in 2009 by self-employed people alone.

As GDP that year was €235bn and the total tax base was just €98bn, it is clear that this was a significant sum. At a tax rate of 40%, it amounted to almost half the country’s budget deficit in 2008, and 31% in 2009.

The chief offenders are professionals in medicine, engineering, education, accounting, financial services and law. Among the self-employed documented in the report are accountants, dentists, lawyers, doctors, personal tutors and independent financial advisers.

The authors, Adair Morse and Margarita Tsoutsoura from the Booth school of business at the University of Chicago and Nikolaos Artavanis from Virginia Polytechnic Institute, were given unprecedented access to the records of one of the top 10 Greek banks. They found that, when professionals approached the bank for a loan or mortgage, their tax returns showed their debts almost exceeded their incomes ( debt payments ate up 82% of their incomes). For the beleaguered tax authority, this meant their income was too low to qualify for income tax.

On average, they found the true income of self-employed people to be 1.92 times their reported income. Under generally accepted loan criteria, home ownership figure than the UK (80% versus 68%).

The customers would need to show that their debts, after their mortgage payments were taken into consideration, were less than 30% of their income.

To emphasise the global scale of the problem, the authors point out that World Bank studies show that 52% of corporations worldwide hide some of their income from the tax authorities, and 36% of European companies do so. Corruption is everywhere as companies and individuals seek to preserve their status, incomes and standard of living. (Guardian; Full Research Here)

Had the then political leadership rushed to collect these taxes instead for rushing to International Monetary Fund, we wouldn't be here nowadays, with our nerves crashed and our pockets looted from the upcoming austerity measures.

Not to mention the tax evasion amount of 2010.

PS Not a single portion of shame. Doctors still charge 80 euro for home visits, want 120 euro if patient asks for receipt. Other doctors charge 60 euro including receipt. Blame on the patient? The doctor? Or Both?

Greek Tax Evasion in 2009: €28 Billion - Austerity Package 2012: €11.5 Billion - Keep Talking Greece