Europe and the IMF to Bail Out Greece

[Frodo]

Europe announces vast contingency fund, racing to contain crisis

By Howard Schneider
Washington Post Staff Writer
Monday, May 10, 2010

ATHENS -- European finance ministers threw a trillion-dollar protective wall around the euro on Sunday and the European Central Bank said it would begin buying government bonds if necessary as officials on the continent struggled to contain the spread of a government debt crisis that began in Greece.

After a discussion that ran into the early morning Monday, the finance ministers, the ECB and the International Monetary Fund took separate steps meant to stanch a loss of confidence in European governments that had put the world's nascent economic recovery at risk.

A joint European Union-IMF program will give the 16 nations that share the euro access to nearly $1 trillion in loans if world bond markets abandon them and demand higher interest rates. That dynamic pushed Greece to a near-default before a $140 billion bailout by the IMF and Greece's European neighbors.

[Sam Spade]

I want to get the exact terms of what will be done, of course.  But if what I'm reading is correct, I can now guarantee you that it will blow up down the road, as this basically amounts to a "paper bazooka".  Key point being - it won't be right now and it'll be market-positive, but I suspect it'll be quicker than you might think.

[2952-0-0]

I want to get the exact terms of what will be done, of course.  But if what I'm reading is correct, I can now guarantee you that it will blow up down the road, as this basically amounts to a "paper bazooka".  Key point being - it won't be right now and it'll be market-positive, but I suspect it'll be quicker than you might think.

I hope you weren't making such claims when Hong Kong was doing the same thing when Soros and Co. were doing their speculative attack.

[opebo]

I want to get the exact terms of what will be done, of course.  But if what I'm reading is correct, I can now guarantee you that it will blow up down the road, as this basically amounts to a "paper bazooka".  Key point being - it won't be right now and it'll be market-positive, but I suspect it'll be quicker than you might think.

Ha ha, this was a classic SS post.  (not as classic as where he just says he knows something and refuses to divulge it, but close).

One wonders what could be done about a problem of inadequacy of funds other than to... provide funds?

[Beet]

Well, either the bazooka must keep firing (printing) until all of Europe's deficit commitments are paid off in the short, medium AND long term, or there must be sharp budget reform that restores sustainability. Probably it will have to be a combination of both. But it must be implemented, that is the key. And that requires not just the politicians but also the populace waking up to the need for tough or unusual measures. The US ought to take note as well.

[opebo]

Well, either the bazooka must keep firing (printing) until all of Europe's deficit commitments are paid off in the short, medium AND long term, or there must be sharp budget reform that restores sustainability. Probably it will have to be a combination of both. But it must be implemented, that is the key. And that requires not just the politicians but also the populace waking up to the need for tough or unusual measures. The US ought to take note as well.

Well, I don't know about 'tough or unusual' - would simply returning to the reasonable tax rates which prevailed before the Reagan debacle be 'tough' or 'unusual'?  More like a return to normalcy from my point of view.

[Gustaf]

Well, either the bazooka must keep firing (printing) until all of Europe's deficit commitments are paid off in the short, medium AND long term, or there must be sharp budget reform that restores sustainability. Probably it will have to be a combination of both. But it must be implemented, that is the key. And that requires not just the politicians but also the populace waking up to the need for tough or unusual measures. The US ought to take note as well.

Well, I don't know about 'tough or unusual' - would simply returning to the reasonable tax rates which prevailed before the Reagan debacle be 'tough' or 'unusual'?  More like a return to normalcy from my point of view.

Would that be sufficient is a better question? You seem to ignore the fact that these tax rates would prevail at constant levels of government spending, so it would certainly increase hardship compared to today.

[opebo]

Would that be sufficient is a better question? You seem to ignore the fact that these tax rates would prevail at constant levels of government spending, so it would certainly increase hardship compared to today.

What now?  I was proposing that a solution to our problems was merely to increase the tax rates on the rich to what they used to be.   The meaning of your response was quite unclear.

[Gustaf]

Would that be sufficient is a better question? You seem to ignore the fact that these tax rates would prevail at constant levels of government spending, so it would certainly increase hardship compared to today.

What now?  I was proposing that a solution to our problems was merely to increase the tax rates on the rich to what they used to be.   The meaning of your response was quite unclear.

Yes - you're claiming that the US deficit can be removed by returning to some previous, somewhat unspecified, tax rate on the rich. I'm questioning that.

Anyway, I did a little research, since I don't expect it from you. Top marginal tax rates in the 70s were about twice what they are now. It is hard for me to calculate exactly what that would mean, but a rough shot looks something like this:

The US gets just below 20% of GDP in federal taxes right now and is running a deficit of about 12% of GDP. So in order to remove the deficit without changing spending you would have to increase tax revenue by about 60-70%. From what I can find about half of the federal tax income comes from income taxes. So, federal income tax revenue is about 9% of GDP. You would have to more than double that to remove the deficit. However, the top 10% of earners paid about 70% of total federal tax revenue, so we're down to 5.5% of GDP.

You would have to triple that figure to get rid of the deficit and you're obviously not going to be doing that by doubling the top marginal rate on those people.

So, your proposed solution is not a solution to the problem Beet posed.

[Gustaf]

Here are the sources I used:
http://www.taxfoundation.org/taxdata/show/250.html
http://www.taxpolicycenter.org/briefing-book/background/numbers/revenue.cfm

I'm the first to admit that I'm not too familiar with the insanely complicated American tax system so there may be mistakes here and there in my reasoning but I doubt it changes the main point.

[opebo]

So, your proposed solution is not a solution to the problem Beet posed.

To be perfectly honest, I was not aware that Beet had proposed that the existence of any deficit was the problem.. as I understood it he seemed to believe that our current deficit level was 'unsustainable'.  I do honestly think that, even given your figures, raising the top tax rate to something in the 70-90% range would easily generate enough revenue to reduce the deficit to a very low - and certainly 'sustainable' level.

OK, I'll take a look at those web sites I just noticed you posted...

OK, so the top 10% of taxpayers is currently paying only 18.79% in taxes overall.. so lets say we do triple that, as you suggested - that gets us to just 56.37% (obviously that's overall, not a top rate, but perhaps that would be realistic if the top rate were set at 70% or 90% as it used to be?)

So, lets see, in 2008, that top 10% paid about 794 billions in taxes.. so multiplied by 3, that gives us 2 trillion 382 billion.  What was the deficit last year?  I think it was less than the 1.588 trillion increase in revenue that gives us.

Well, I guess now that I took the time to analyze it, given your sources - it does solve even the problem of totally wiping out the deficit.  Neat!

[Gustaf]

So, your proposed solution is not a solution to the problem Beet posed.

To be perfectly honest, I was not aware that Beet had proposed that the existence of any deficit was the problem.. as I understood it he seemed to believe that our current deficit level was 'unsustainable'.  I do honestly think that, even given your figures, raising the top tax rate to something in the 70-90% range would easily generate enough revenue to reduce the deficit to a very low - and certainly 'sustainable' level.

OK, I'll take a look at those web sites I just noticed you posted...

OK, so the top 10% of taxpayers is currently paying only 18.79% in taxes overall.. so lets say we do triple that, as you suggested - that gets us to just 56.37% (obviously that's overall, not a top rate, but perhaps that would be realistic if the top rate were set at 70% or 90% as it used to be?)

So, lets see, in 2008, that top 10% paid about 794 billions in taxes.. so multiplied by 3, that gives us 2 trillion 382 billion.  What was the deficit last year?  I think it was less than the 1.588 trillion increase in revenue that gives us.

Well, I guess now that I took the time to analyze it, given your sources - it does solve even the problem of totally wiping out the deficit.  Neat!

Eh...the top marginal tax rate is 35%. Doubling that would get you to 70%, the top rate in your beloved 70s, but that's not doubling the overall tax amount paid by them. And it certainly is not tripling it.

I mean, now you're just trolling I actually did the calculations for you! You ignored what I said, did the exact same caluclation I just did and then pretended as if you responded. I just said that tripling the amount of tax paid by this group would remove the deficit. You repeated the same thing again, arriving at it in a different fashion, but failed to respond to the actual point - you're not going to achieve this by increasing the top rates.

[opebo]

...I mean, now you're just trolling ...

Are you going to ban me for disagreeing with you?  I'm not 'trolling', I'm looking at the same web site you are:

Adjusted Gross income for the top 10% is 4.2 trillion according to that web site. 

The top 10% paid 784 billion in income taxes in 07.  That was 18.78%, again according to the website.

So, if we triple the amount paid, we get about 2.3 trillion, which is around 56% of the 4.2 trillion in adjusted gross income for that top 10%, again from the web site you supplied. 

So, I don't know exactly what rates would need to be imposed to extract that specifically, but the income is there, and the amount is 56% of it.  Whether that means a top rate of 70% or 90% whatever, or just an overall rate of 56% on all the income of that class, I don't know - there is some leeway in what rates would get you to an overall rate on the rich of 56%.  But the figures are right there in your web site.

[Gustaf]

...I mean, now you're just trolling ...

Are you going to ban me for disagreeing with you?  I'm not 'trolling', I'm looking at the same web site you are:

Adjusted Gross income for the top 10% is 4.2 trillion according to that web site. 

The top 10% paid 784 billion in income taxes in 07.  That was 18.78%, again according to the website.

So, if we triple the amount paid, we get about 2.3 trillion, which is around 56% of the 4.2 trillion in adjusted gross income for that top 10%, again from the web site you supplied. 

So, I don't know exactly what rates would need to be imposed to extract that specifically, but the income is there, and the amount is 56% of it.  Whether that means a top rate of 70% or 90% whatever, or just an overall rate of 56% on all the income of that class, I don't know - there is some leeway in what rates would get you to an overall rate on the rich of 56%.  But the figures are right there in your web site.

...

I don't know what to say. I assumed that the economic genius that is Opebo realized the difference between marginal rates and average rates but I'm not so sure anymore.

I'll give it one more try:

1. The top marginal rate is 35%.
2. Tripling that rate is impossible (35*3>100).
3. Hence, you cannot triple the average paid by those people by adjusting the top rate.

What is it that you don't get about this?

I'm not even resorting to the fact that empirical experience suggests that high top rates do not increase revenue by very much, since income tax revenue in countries like Sweden and the US did not change much when the high rates were scrapped.

Nor have I touched the fact that all countries left those high rates because they were a bad idea.

[opebo]

I don't know what to say. I assumed that the economic genius that is Opebo realized the difference between marginal rates and average rates but I'm not so sure anymore.

I'll give it one more try:

1. The top marginal rate is 35%.
2. Tripling that rate is impossible (35*3>100).
3. Hence, you cannot triple the average paid by those people by adjusting the top rate.

What is it that you don't get about this?

We're talking about two different things.

I never proposed 'tripling the top rate'.  I proposed 'simply returning to the reasonable tax rates which prevailed before the Reagan debacle'.  I did not propose any specific rates - after all various rates, both top and on down the line, applied in the period before the Reagan debacle. 

What I did propose in my subsequent post was tripling the tax take.  Given that the current average is only 18.78 percent, this is easily doable. 

We have no way of knowing exactly what rates would get us to a 56% take of the income of the parasitic class instead of an 18.78% take - this would have to be adjusted as we go along.  But I'm sure it could be consistent with a top rate in the 70-90 percent range.

[Gustaf]

I don't know what to say. I assumed that the economic genius that is Opebo realized the difference between marginal rates and average rates but I'm not so sure anymore.

I'll give it one more try:

1. The top marginal rate is 35%.
2. Tripling that rate is impossible (35*3>100).
3. Hence, you cannot triple the average paid by those people by adjusting the top rate.

What is it that you don't get about this?

We're talking about two different things.

I never proposed 'tripling the top rate'.  I proposed 'simply returning to the reasonable tax rates which prevailed before the Reagan debacle'.  I did not propose any specific rates - after all various rates, both top and on down the line, applied in the period before the Reagan debacle. 

What I did propose in my subsequent post was tripling the tax take.  Given that the current average is only 18.78 percent, this is easily doable. 

We have no way of knowing exactly what rates would get us to a 56% take of the income of the parasitic class instead of an 18.78% take - this would have to be adjusted as we go along.  But I'm sure it could be consistent with a top rate in the 70-90 percent range.

You cannot seriously be this thick...I'll try once more:

Since the top rate today is half of what it was then, doubling it will not be consistent with tripling the tax burden on this group. How can you not understand that? It isn't even necessary to know economics to comprehend this!

Is it so hard to just admit that you didn't know what you were talking about? You can still be a pretend-socialist, you know, acepting facts doesnot negate that.

[opebo]

You cannot seriously be this thick...I'll try once more:

Since the top rate today is half of what it was then, doubling it will not be consistent with tripling the tax burden on this group. How can you not understand that? It isn't even necessary to know economics to comprehend this!

What does doubling the top tax rate have to do with what I was talking about?  You're just talking about a separate issue which has no bearing on my post.  

The web site you provided gave the tax take as 18.79% of the income of the top 10% of earners.  It is right there in the chart if you look.  Just click on it and look: http://www.taxfoundation.org/taxdata/show/250.html

So, the point is there is easily money there to eliminate the deficit.  I don' t know why you are continuously on about the top tax rate, as I never mentioned it.

edit to correct the percentage - it was 18.79%, not 18.78% as I had originally quoted.

[Tender Branson]

A few days ago, I´ve read about the massive tax dodging in Greece, that is one of the main problems why Greece`s revenues are that low and the budget deficit is so high, in the newspaper "Der Standard". The New York Times has the english article. Take a look here:

"ATHENS — In the wealthy, northern suburbs of this city, where summer temperatures often hit the high 90s, just 324 residents checked the box on their tax returns admitting that they owned pools. So tax investigators studied satellite photos of the area — a sprawling collection of expensive villas tucked behind tall gates — and came back with a decidedly different number: 16,974 pools.

That kind of wholesale lying about assets, and other eye-popping cases that are surfacing in the news media here, points to the staggering breadth of tax dodging that has long been a way of life here.

Such evasion has played a significant role in Greece’s debt crisis, and as the country struggles to get its financial house in order, it is going after tax cheats as never before.

Various studies, including one by the Federation of Greek Industries last year, have estimated that the government may be losing as much as $30 billion a year to tax evasion — a figure that would have gone a long way to solving its debt problems.

“We need to grow up,” said Ioannis Plakopoulos, who like all owners of newspaper stands will have to give receipts and start using a cash register under the new tax laws passed last month. “We need to learn not to cheat or to let others cheat.”

But even so, changing things will not be easy. Experts point out that ducking taxes is part of a broader culture of bribery and corruption that is deeply entrenched.

Mr. Plakopoulos, who supports most of the government’s new efforts, admits that he and his friends used to chuckle over the best ways to avoid taxes.

To get more attentive care in the country’s national health system, Greeks routinely pay doctors cash on the side, a practice known as “fakelaki,” Greek for little envelope. And bribing government officials to grease the wheels of bureaucracy is so standard that people know the rates. They say, for instance, that 300 euros, about $400, will get you an emission inspection sticker.

Some of the most aggressive tax evaders, experts say, are the self-employed, a huge pool of people in this country of small businesses. It includes not just taxi drivers, restaurant owners and electricians, but engineers, architects, lawyers and doctors.

The cheating is often quite bold. When tax authorities recently surveyed the returns of 150 doctors with offices in the trendy Athens neighborhood of Kolonaki, where Prada and Chanel stores can be found, more than half had claimed an income of less than $40,000. Thirty-four of them claimed less than $13,300, a figure that exempted them from paying any taxes at all.

Such incomes defy belief, said Ilias Plaskovitis, the general secretary of the Finance Ministry, who has been in charge of revamping the country’s tax laws. “You need more than that to pay your rent in that neighborhood,” he said.

He said there were only a few thousand citizens in this country of 11 million who last year declared an income of more than $132,000. Yet signs of wealth abound.

“There are many people with a house, with a cottage in the country, with two cars and maybe a small boat who claim they are earning 12,000 euros a year,” Mr. Plaskovitis said, which is about $15,900. “You cannot heat this house or buy the gas for the car with that kind of income.”

story continues ...

http://www.nytimes.com/2010/05/02/world/europe/02evasion.html

[Gustaf]

I've added emphasis in some places.

Well, I don't know about 'tough or unusual' - would simply returning to the reasonable tax rates which prevailed before the Reagan debacle be 'tough' or 'unusual'?  More like a return to normalcy from my point of view.

What now?  I was proposing that a solution to our problems was merely to increase the tax rates on the rich to what they used to be.   The meaning of your response was quite unclear.

To be perfectly honest, I was not aware that Beet had proposed that the existence of any deficit was the problem.. as I understood it he seemed to believe that our current deficit level was 'unsustainable'.  I do honestly think that, even given your figures, raising the top tax rate to something in the 70-90% range would easily generate enough revenue to reduce the deficit to a very low - and certainly 'sustainable' level.

OK, I'll take a look at those web sites I just noticed you posted...

OK, so the top 10% of taxpayers is currently paying only 18.79% in taxes overall.. so lets say we do triple that, as you suggested - that gets us to just 56.37% (obviously that's overall, not a top rate, but perhaps that would be realistic if the top rate were set at 70% or 90% as it used to be?)

So, lets see, in 2008, that top 10% paid about 794 billions in taxes.. so multiplied by 3, that gives us 2 trillion 382 billion.  What was the deficit last year?  I think it was less than the 1.588 trillion increase in revenue that gives us.

Well, I guess now that I took the time to analyze it, given your sources - it does solve even the problem of totally wiping out the deficit.  Neat!

What does doubling the top tax rate have to do with what I was talking about?  You're just talking about a separate issue which has no bearing on my post.  

The web site you provided gave the tax take as 18.79% of the income of the top 10% of earners.  It is right there in the chart if you look.  Just click on it and look: http://www.taxfoundation.org/taxdata/show/250.html

So, the point is there is easily money there to eliminate the deficit.  I don' t know why you are continuously on about the top tax rate, as I never mentioned it.

edit to correct the percentage - it was 18.79%, not 18.78% as I had originally quoted.

So, I guess you lied again. Not that there is much point in pointing it out since you always ignore it but still - it is always a good feeling to be able to defeat someone in a debate using only their own posts. Doesn't happen often.

[opebo]

Yes, precisely - in my original comment in this thread I did not mention the top tax rate. 

In the longer subsequent post in which I did mention the top tax rate, I specifically said that I was proposing to increase the tax take on the top 10% (from 18.79% to 56%), and that I did not know if raising the top tax rate to 70-90% would accomplish this or whether some other combination of tax rates would do so:

I do honestly think that, even given your figures, raising the top tax rate to something in the 70-90% range would easily generate enough revenue to reduce the deficit to a very low - and certainly 'sustainable' level.

...I'll take a look at those web sites I just noticed you posted...

...so the top 10% of taxpayers is currently paying only 18.79% in taxes overall.. so lets say we do triple that, as you suggested - that gets us to just 56.37% (obviously that's overall, not a top rate, but perhaps that would be realistic if the top rate were set at 70% or 90% as it used to be?)

Anyway, my analysis is correct:

The deficit could be largely eliminated by seizing the income of the top 10%.  As your source states, their income is 4.2 trillion, and they currently only pay about 794 billion (18.79%) in tax.  What was the deficit this last year?  Around 1.5 trillion?  So, tripling their tax would more than cover that, and still leave them with 44% of their income.

[Gustaf]

Yes, precisely - in my original comment in this thread I did not mention the top tax rate. 

In the longer subsequent post in which I did mention the top tax rate, I specifically said that I was proposing to increase the tax take on the top 10% (from 18.79% to 56%), and that I did not know if raising the top tax rate to 70-90% would accomplish this or whether some other combination of tax rates would do so:

I do honestly think that, even given your figures, raising the top tax rate to something in the 70-90% range would easily generate enough revenue to reduce the deficit to a very low - and certainly 'sustainable' level.

...I'll take a look at those web sites I just noticed you posted...

...so the top 10% of taxpayers is currently paying only 18.79% in taxes overall.. so lets say we do triple that, as you suggested - that gets us to just 56.37% (obviously that's overall, not a top rate, but perhaps that would be realistic if the top rate were set at 70% or 90% as it used to be?)

Anyway, my analysis is correct:

The deficit could be largely eliminated by seizing the income of the top 10%.  As your source states, their income is 4.2 trillion, and they currently only pay about 794 billion (18.79%) in tax.  What was the deficit this last year?  Around 1.5 trillion?  So, tripling their tax would more than cover that, and still leave them with 44% of their income.

Increasing taxes on the rich=increasing the top rate. Otherwise you're raising taxes for everyone. But I assume this is another one of those cases where you prefer to delude yourself than to actually face reality, so I will leave you to it, I suppose.

[opebo]

Increasing taxes on the rich=increasing the top rate. Otherwise you're raising taxes for everyone. But I assume this is another one of those cases where you prefer to delude yourself than to actually face reality, so I will leave you to it, I suppose.

Increasing taxes on the rich can (and should) include raising the top rate, but it can and should also include elimination of deductions.

If the upper class is currently paying only 18.79% of their adjusted gross income in tax, then we can increase this take by raising rates and making more of their income subject to taxation.  The observation that there is money there to be reclaimed is valid - as your website shows, they have 4.2 trillion income.

[Gustaf]

Increasing taxes on the rich=increasing the top rate. Otherwise you're raising taxes for everyone. But I assume this is another one of those cases where you prefer to delude yourself than to actually face reality, so I will leave you to it, I suppose.

Increasing taxes on the rich can (and should) include raising the top rate, but it can and should also include elimination of deductions.

If the upper class is currently paying only 18.79% of their adjusted gross income in tax, then we can increase this take by raising rates and making more of their income subject to taxation.  The observation that there is money there to be reclaimed is valid - as your website shows, they have 4.2 trillion income.

But that is not what you said! You specifically said going back to the top rates of the 70s would be enough and it clearly wasn't. You were, as usual, trying to claim that everything was better in the 70s and this was a good illustration of the fact that this is not based on real analysis from your side.

[Landslide Lyndon]

A few days ago, I´ve read about the massive tax dodging in Greece, that is one of the main problems why Greece`s revenues are that low and the budget deficit is so high, in the newspaper "Der Standard". The New York Times has the english article. Take a look here:

"ATHENS — In the wealthy, northern suburbs of this city, where summer temperatures often hit the high 90s, just 324 residents checked the box on their tax returns admitting that they owned pools. So tax investigators studied satellite photos of the area — a sprawling collection of expensive villas tucked behind tall gates — and came back with a decidedly different number: 16,974 pools.

That kind of wholesale lying about assets, and other eye-popping cases that are surfacing in the news media here, points to the staggering breadth of tax dodging that has long been a way of life here.

Such evasion has played a significant role in Greece’s debt crisis, and as the country struggles to get its financial house in order, it is going after tax cheats as never before.

Various studies, including one by the Federation of Greek Industries last year, have estimated that the government may be losing as much as $30 billion a year to tax evasion — a figure that would have gone a long way to solving its debt problems.

“We need to grow up,” said Ioannis Plakopoulos, who like all owners of newspaper stands will have to give receipts and start using a cash register under the new tax laws passed last month. “We need to learn not to cheat or to let others cheat.”

But even so, changing things will not be easy. Experts point out that ducking taxes is part of a broader culture of bribery and corruption that is deeply entrenched.

Mr. Plakopoulos, who supports most of the government’s new efforts, admits that he and his friends used to chuckle over the best ways to avoid taxes.

To get more attentive care in the country’s national health system, Greeks routinely pay doctors cash on the side, a practice known as “fakelaki,” Greek for little envelope. And bribing government officials to grease the wheels of bureaucracy is so standard that people know the rates. They say, for instance, that 300 euros, about $400, will get you an emission inspection sticker.

Some of the most aggressive tax evaders, experts say, are the self-employed, a huge pool of people in this country of small businesses. It includes not just taxi drivers, restaurant owners and electricians, but engineers, architects, lawyers and doctors.

The cheating is often quite bold. When tax authorities recently surveyed the returns of 150 doctors with offices in the trendy Athens neighborhood of Kolonaki, where Prada and Chanel stores can be found, more than half had claimed an income of less than $40,000. Thirty-four of them claimed less than $13,300, a figure that exempted them from paying any taxes at all.

Such incomes defy belief, said Ilias Plaskovitis, the general secretary of the Finance Ministry, who has been in charge of revamping the country’s tax laws. “You need more than that to pay your rent in that neighborhood,” he said.

He said there were only a few thousand citizens in this country of 11 million who last year declared an income of more than $132,000. Yet signs of wealth abound.

“There are many people with a house, with a cottage in the country, with two cars and maybe a small boat who claim they are earning 12,000 euros a year,” Mr. Plaskovitis said, which is about $15,900. “You cannot heat this house or buy the gas for the car with that kind of income.”

story continues ...

http://www.nytimes.com/2010/05/02/world/europe/02evasion.html

We are a wonderful country, aren't we?

I've said it before, tax evasion is our national pastime and arguably the root of all fiscal evil.
If we solve this matter (along with corruption of course) then I expect us getting out of our current predicament much faster than many believe.

[Gustaf]

A few days ago, I´ve read about the massive tax dodging in Greece, that is one of the main problems why Greece`s revenues are that low and the budget deficit is so high, in the newspaper "Der Standard". The New York Times has the english article. Take a look here:

"ATHENS — In the wealthy, northern suburbs of this city, where summer temperatures often hit the high 90s, just 324 residents checked the box on their tax returns admitting that they owned pools. So tax investigators studied satellite photos of the area — a sprawling collection of expensive villas tucked behind tall gates — and came back with a decidedly different number: 16,974 pools.

That kind of wholesale lying about assets, and other eye-popping cases that are surfacing in the news media here, points to the staggering breadth of tax dodging that has long been a way of life here.

Such evasion has played a significant role in Greece’s debt crisis, and as the country struggles to get its financial house in order, it is going after tax cheats as never before.

Various studies, including one by the Federation of Greek Industries last year, have estimated that the government may be losing as much as $30 billion a year to tax evasion — a figure that would have gone a long way to solving its debt problems.

“We need to grow up,” said Ioannis Plakopoulos, who like all owners of newspaper stands will have to give receipts and start using a cash register under the new tax laws passed last month. “We need to learn not to cheat or to let others cheat.”

But even so, changing things will not be easy. Experts point out that ducking taxes is part of a broader culture of bribery and corruption that is deeply entrenched.

Mr. Plakopoulos, who supports most of the government’s new efforts, admits that he and his friends used to chuckle over the best ways to avoid taxes.

To get more attentive care in the country’s national health system, Greeks routinely pay doctors cash on the side, a practice known as “fakelaki,” Greek for little envelope. And bribing government officials to grease the wheels of bureaucracy is so standard that people know the rates. They say, for instance, that 300 euros, about $400, will get you an emission inspection sticker.

Some of the most aggressive tax evaders, experts say, are the self-employed, a huge pool of people in this country of small businesses. It includes not just taxi drivers, restaurant owners and electricians, but engineers, architects, lawyers and doctors.

The cheating is often quite bold. When tax authorities recently surveyed the returns of 150 doctors with offices in the trendy Athens neighborhood of Kolonaki, where Prada and Chanel stores can be found, more than half had claimed an income of less than $40,000. Thirty-four of them claimed less than $13,300, a figure that exempted them from paying any taxes at all.

Such incomes defy belief, said Ilias Plaskovitis, the general secretary of the Finance Ministry, who has been in charge of revamping the country’s tax laws. “You need more than that to pay your rent in that neighborhood,” he said.

He said there were only a few thousand citizens in this country of 11 million who last year declared an income of more than $132,000. Yet signs of wealth abound.

“There are many people with a house, with a cottage in the country, with two cars and maybe a small boat who claim they are earning 12,000 euros a year,” Mr. Plaskovitis said, which is about $15,900. “You cannot heat this house or buy the gas for the car with that kind of income.”

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http://www.nytimes.com/2010/05/02/world/europe/02evasion.html

We are a wonderful country, aren't we?

I've said it before, tax evasion is our national pastime and arguably the root of all fiscal evil.
If we solve this matter (along with corruption of course) then I expect us getting out of our current predicament much faster than many believe.

Of course. Given Greece's level of GDP and geographical location they SHOULD have enormous growth. Solving the institutional issues is probably the only thing preventing that.

The problem, on the other hand, is that things like corruption and lack of respect for tax authorities is often damn hard to solve.

The one thing I've seen that looks good for Greece is that polls have shown a majority favouring the reforms and cut-backs. That's an indication of responsibility and rising to the challenge, at least.