Analysis of the Factors Affecting Tax Evasion in Greece

Purpose: This study is an attempt to capture the concept of tax evasion, to distinguish it from tax avoidance and to illustrate the magnitude of the problem in Greece. Design/Methodology/Approach: Time series analysis and regression analysis were performed to determine which factors affect tax compliance in Greece. Data were collected from three different directorates of the Greek Independent Authority for Public Revenue (IAPR), K.E.ME.EP. (Audit Authority for Large Enterprises), K.E.F.O.ME.P. (Audit Authority for Taxpayers with Great Wealth) and Y.E.D.D.E. (Services for Investigations & Safeguarding of Public Revenue). Findings: The results of the research showed that the amount of fines and taxes (related to tax compliance) imposed are statistically significant and positively dependent on both the number of audits and the amounts of money imposed as fines for each audit carried out by K.E.ME.EP. and K.E.F.O.ME.P., while for Y.E.D.D.E. the identified revenue foregone depends only on the number of completed audits. Practical Implications: Tax evasion is a phenomenon that has been of concern to the governments of all countries since ancient times, because it results in both the loss of state revenues and an unequal and unfair distribution of tax burdens. However, tackling tax evasion is a particularly difficult task, mainly because it cannot be easily detected and measured. Originality/Value: This research points out that frequent and effective audits, combined with high fines, are a tool to reduce tax evasion and increase tax compliance.