Counterincentives for tax dodgers

There is no better proof of a tax system’s bankruptcy than tax dodging, especially when this becomes as outrageously evident as it is here in Greece. The figures cited yesterday by Finance Minister Giorgos Alogoskoufis underscore the size of the social injustice inflicted by tax dodgers. The average income for pensioners stands at 8,898 euros annually, while average income is 5,212 euros per year for bar owners and 8,154 for restaurant owners. It’s hard to believe of course that club or restaurant owners actually make less money than pensioners. The real difference is that pensioners’ incomes are open to monitoring by the state’s tax authorities. With the exception of salaried workers and pensioners, all other taxpayer groups have the luxury of indulging in the Greeks’ pet habit: tax evasion. This is despite repeated government pledges to crack down on a problem that has nonetheless never stopped growing. However, it seems that for the first time a basic condition for limiting this antisocial behavior has been met. Our optimism is not based on the strict measures announced by the administration but rather on its intention to introduce tax cuts in a number of categories. Bringing the tax rates on businesses and taxpayers down to more reasonable levels is the only way to curb tax evasion. There is no safer way to fight tax evasion than cutting tax rates and introducing hefty fines for those who insist on hiding their true incomes. Gradual tax cuts over the next two years, as outlined in the government’s program, will reduce incentives for tax dodgers and at the same time increase state revenues from taxes. It is important that, besides curbing tax evasion, the new measures are expected to improve people’s relations with the tax office – a change that will also strengthen public confidence in the state.

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