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Greece’s shadow economy: The treasures of darkness

Greece’s shadow economy: The treasures of darkness“, The Economist, 10 Οκτωβρίου.

 

Getting Greeks to pay more tax is not just hard, but risky

TWO out of three Greek workers either understate their earnings or fail to disclose them to the taxman altogether, according to Stephen Hall, an adviser to the Bank of Greece. Last year an estimated 24% of all economic activity in Greece went undeclared to evade tax and regulation, well above the European average of 19%.

The IMF, which was in Athens this week to check up on Greece’s public accounts, would like to bring more of this activity into the sunlight, to boost government revenues. After a calamitous recession in which the economy shrank by 30%, government debt now stands at 174% of GDP; the budget deficit last year was almost 13% of GDP. But there is a risk that an overly aggressive tax-raising drive will compound the problem.

Greeks, even more than their counterparts elsewhere, feel that their taxes are wasted. One study, using data from the 1990s, put Greece’s “tax morale” fourth-lowest of 26 countries. Greece’s public sector is more corrupt than that of any other EU state, according to Transparency International, a pressure group. Satisfaction with public services is extremely low. No wonder, then, that many Greeks have few qualms about not paying their share.

Greece also has high self-employment, which tends to lead to bigger underground economies. It is relatively easy for those working for themselves to evade income tax and social-security contributions. Greeks have plenty of incentive to do so: government levies account for 43% of labour costs, compared with the rich-country average of 26%.

 

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