The newly elected Syriza government, to their great credit, has vowed to go after the small minority of wealthy Greeks who have squirrelled away their Euros in Swiss bank accounts and systematically evaded paying their fair share of taxes. But I heard a commentator on the radio yesterday who spoke an important truth–that it is not just the wealthy who evade taxes, but virtually everyone in this society. “When we buy something and are given a discount in exchange for not requiring a receipt (which would make the seller’s income taxable), we need to take a hard look at ourselves–we are all a part of the problem,” the commentator argued.
And I think it would be hard for anyone familiar with Greek society to argue with this conclusion. It is not only small shopkeepers or the plumber or electrician who cheat on taxes–it is professionals like the doctor, the insurance agent, and the attorney (yes, the person responsible for ensuring clients’ compliance with the law), perhaps more than anyone.
Why is tax evasion an almost universal practice among Greeks? Because for decades (at least), they have seen their governments squander, steal, and give away to their cronies the taxpayer’s hard earned funds. What has the government ever done for me? is a refrain commonly heard. So no one pays their legal share of taxes. So the government raises taxes to even higher levels. So people evade taxes even more. And so on.
This vicious cycle may be an even greater challenge, a more intractable problem, for Syriza, than taking on Scheuble et al in their insistence on brutal austerity at all costs. How does a government, not matter how well-intentioned, convince its people that now their tax money will all be spent wisely and to good ends? How does a government convince people to stand up and say “I realize that no one else pays their fair share of taxes, but I am going to make a leap of faith and do my part for a better society!”
My anecdotal impressions of widespread tax evasion in Greece are confirmed by a paper cited in an article today in the UK Business Insider. The paper found that self-employed Greeks in certain professions reported earning less income than they were actually spending monthly on servicing their debts—a miraculous feat. Notable were those in the Accounting and Financial Services industry who actually spent 15% more monthly on paying off debts than they claimed to be earning. I guess you learn some good tricks when you study accounting…
Artavanis, Morse, Tsoutsoura, Chicago Booth
cited in “This is the Real Reason Greece has a Massive Tax Evasion Problem“, Business Insider UK, 2/25/15