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Distributional implications of tax evasion in Greece

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  • Manos Matsaganis
  • Maria Flevotomou
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    Abstract

    The shadow economy and tax evasion are both widespread in Greece. This has adverse effects in terms of horizontal and vertical equity, as well as in terms of efficiency. We take advantage of access to a large sample of income tax returns in 2004/05, and compare tax reported incomes with those observed in the household budget survey of that year. We re-weight our two datasets to make them fully comparable, and carefully select the reference population. We then calculate ratios of income under-reporting by region and income source. The synthetic distribution of reported incomes is then fed into a taxbenefit model to provide preliminary estimates of the size and distribution of income tax evasion in Greece. Income under-reporting is estimated at 10%, resulting in a 26% shortfall in tax receipts. The paper finds that the effects of tax evasion are higher income inequality and poverty, as well as lower progressivity of the income tax system.

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    File URL: http://eprints.lse.ac.uk/26074/
    File Function: Open access version.
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    Bibliographic Info

    Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 26074.

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    Length: 40 pages
    Date of creation: Jan 2010
    Date of revision:
    Handle: RePEc:ehl:lserod:26074

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    Related research

    Keywords: tax evasion; inequality; microsimulation;

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    Cited by:
    1. Theodore Pelagidis, 2010. "The Greek Paradox of Falling Competitiveness and Weak Institutions in a High GDP Growth Rate Context (1995-2008)," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 38, Hellenic Observatory, LSE.
    2. Eugenia Markova, 2010. "Effects of Migration on Sending Countries: lessons from Bulgaria," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 35, Hellenic Observatory, LSE.
    3. Spyros Kosmidis, 2013. "Government Constraints and Economic Voting in Greece," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 70, Hellenic Observatory, LSE.
    4. Manussos Marangudakis & Kostas Rontos & Maria Xenitidou, 2013. "State Crisis and Civil Consciousness in Greece," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 77, Hellenic Observatory, LSE.
    5. Christos Dimas, 2010. "Privatization in the name of ‘Europe’: analyzing the telecoms privatization in Greece from a ‘discursive institutionalist’ perspective," LSE Research Online Documents on Economics 31089, London School of Economics and Political Science, LSE Library.
    6. Stelios Karagiannis & Yannis Panagopoulos & Prodromos Vlamis, 2010. "Symmetric or Asymmetric Interest Rate Adjustments? Evidence from Greece, Bulgaria and Slovenia," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 39, Hellenic Observatory, LSE.
    7. Prodromos Vlamis, 2013. "Greek Fiscal Crisis and Repercussions for the Property Market," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 76, Hellenic Observatory, LSE.
    8. Helen Caraveli & Efthymios G. Tsionas, 2012. "Economic Restructuring, Crises and the Regions: The Political Economy of Regional Inequalities in Greece," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 61, Hellenic Observatory, LSE.
    9. George Pagoulatos & Nikolaos Zahariadis, 2011. "Politics, Labor, Regulation, and Performance: lessons from the privatization of OTE," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 46, Hellenic Observatory, LSE.
    10. Nicholas Apergis, 2011. "Characteristics of inflation in Greece: mean spillover effects among CPI components," LSE Research Online Documents on Economics 32597, London School of Economics and Political Science, LSE Library.
    11. George Kazamias, 2010. "From Pragmatism to Idealism to Failure: Britain in the Cyprus crisis of 1974," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 42, Hellenic Observatory, LSE.
    12. Vassilis Monastiriotis & Jacob A. Jordaan, 2011. "Regional Distribution and Spatial Impact of FDI in Greece: evidence from firm-level data," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 44, Hellenic Observatory, LSE.
    13. George Alogoskoufis, 2012. "Greece’s Sovereign Debt Crisis: Retrospect and Prospect," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 54, Hellenic Observatory, LSE.
    14. Horen Voskeritsian & Andreas Kornelakis, 2011. "Institutional Change in Greek Industrial Relations in an Era of Fiscal Crisis," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 52, Hellenic Observatory, LSE.
    15. Spyros Kosmidis, 2013. "Government constraints and economic voting in Greece," LSE Research Online Documents on Economics 50259, London School of Economics and Political Science, LSE Library.
    16. George Pagoulatos & Nikolaos Zahariadis, 2011. "Politics, labor, regulation, and performance: lessons from the privatization of OTE," LSE Research Online Documents on Economics 33827, London School of Economics and Political Science, LSE Library.
    17. Christos Lyrintzis, 2011. "Greek politics in the era of economic crisis: reassessing causes and effects," LSE Research Online Documents on Economics 33826, London School of Economics and Political Science, LSE Library.
    18. Nicos Christodoulakis, 2014. "The Conflict Trap in the Greek Civil War 1946-1949: An economic approach," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 83, Hellenic Observatory, LSE.
    19. Christos Lyrintzis, 2011. "Greek Politics in the Era of Economic Crisis: Reassessing Causes and Effects," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 45, Hellenic Observatory, LSE.
    20. Christos Dimas, 2010. "Privatization in the Name of ‘Europe’: analyzing the telecoms privatization in Greece from a ‘discursive institutionalist’ perspective," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 41, Hellenic Observatory, LSE.
    21. Vassilis Monastiriotis, 2011. "Regional distribution and spatial impact of FDI in Greece: evidence from firm-level data," LSE Research Online Documents on Economics 32566, London School of Economics and Political Science, LSE Library.

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