Beware of Greeks Declaring Income

The Greek government might be broke, but the Greek people are not:

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.

The article goes onto estimate that about 25% of the Greek economy is underground, whereas in the United States the estimate is about 7.8%. Being The New York Times, the article doesn't make the obvious connection between high rates of Greek tax evasion and high taxes, dwelling instead on the tax department's lackadaisical approach to its job. Greeks avoid paying taxes because the official tax rates are so high. In a culture where the rule of law is still tenuous, a product of centuries of dictatorial rule, the process is even easier. Ordinary people regard the law as a mechanism whereby the elites exploit everyone else, and regard corruption as a form of self-preservation and resistance. 

The effectiveness of a legal system rests on whether the people of a country regard the system as being essentially moral. If the law is seen as punishing the wicked, and upholding the commonly perceived ideals of the good, the law will be generally adhered to. Corruption isn't the real problem for Greece, it's a political system that ordinary Greeks see as exploitive. Why should private business people fork over large chunks of their income to a parasitic, and largely useless, government class? Canadians might regard public sector workers as the pampered idiot brothers of their private sector counterparts, but they generally believe government does help them. Whether the cause of laissez-faire is better served by Greek-style cynicism, or Canadian-levels of naivety, I'll leave to you, gentle reader.

Comments

[crjc]

IIRC 25% is about the size of the "underground" economy here in Canada too. I prefer to think of them as the black market and red market -- one of which is now set up for a spectacular Soviet-style collapse.