Wednesday, February 10, 2010

Greek tax evasion: blame dearth of democratic heritage

From the Wall Street Journal:

"The Greek shadow economy, which is made up of unreported income, was 25.1% of gross domestic product in 2007, according to Friedrich Schneider, a professor at Johannes Kepler University in Linz, Austria. The shadow economies of Spain, Portugal and Italy were all around a fifth of GDP. That compared with just 11.8% for France and 7.2% for the U.S., he said."

No wonder Greece is in such a mess, one might argue. But what explains this surprisingly high rate of unreported income?

"Trying to explain the rampant tax evasion, Prof. Schneider says countries like Spain, Portugal and Greece have had continuous democracies only since the 1970s, and people aren't used to governments representing the public interest.

"In most of these countries, what matters is your family. … There is less of a sense of duty towards the state," says Alberto Alesina, a professor of political economy at Harvard. "Evading taxes is something you can freely talk about—and be proud of—at a dinner party in these countries."

It all goes to underline what taxation, for all its many faults and complexities, is all about - the public interest, trumping narrow family or personal interests. At the end of the day, that's a good thing.


Blogger Physiocrat said...

Centuries of Ottoman domination has done its damage. The Russians would have liberated the Greek city of Constantinople if the Brits hadn't interfered and started the Crimean war, as it was, we had the Armenian massacre and the expulsion of the Greeks from Asia Minor, where they had been for several thousand years. Strange how little is heard about that dispossession these days.

But I digress. It is the same in Italy.
Where there is no tradition of trusting the government, what is to be done. LVT would stop the tax evasion but I can't see it being accepted when there is such a large body of small landholders, even though they would gain in the end.

LVT is implicit in Catholic Social Teaching but I doubt if it would carry much weight these days.

It is strange how there is a strong feeling for the value of the public realm in the cold countries of north-west Europe. I wonder if it is the weather or just that they got rid of their landowning aristocrats by taking their land and leaving them with the handles to their names.

2:57 pm  

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