The crisis and tax evasion in greece what are the distributional implications
This presentation is the property of its rightful owner.
Sponsored Links
1 / 23

The crisis and tax evasion in Greece What are the distributional implications? PowerPoint PPT Presentation


  • 48 Views
  • Uploaded on
  • Presentation posted in: General

The crisis and tax evasion in Greece What are the distributional implications?. Manos Matsaganis, Chrysa Leventi & Maria Flevotomou 2 nd Microsimulation Research Workshop Bucharest, 11 October 2012. the paper. i ntroduction methodology and data results - discussion conclusion.

Download Presentation

The crisis and tax evasion in Greece What are the distributional implications?

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


The crisis and tax evasion in greece what are the distributional implications

The crisis and tax evasion in GreeceWhat are the distributional implications?

Manos Matsaganis, ChrysaLeventi & Maria Flevotomou

2nd Microsimulation Research Workshop

Bucharest, 11 October 2012


The paper

the paper

  • introduction

  • methodology and data

  • results - discussion

  • conclusion

1 / 22


T he paper

the paper

  • introduction

  • methodology and data

  • results - discussion

  • conclusion

2 / 22


Introduction

introduction

  • The current Greek crisis and the country’s fiscal consolidation effort have elevated tax evasion to one of the most crucial policy issues of our times

  • Tax evasion hinders the fiscal efficiency of tax policies

    • most recent estimate of Greece’s informal economy: 24% of GDP (Schneider 2012)

  • Tax evasion creates horizontal inequality, leads to unfair social outcomes and distorts the intended distributional effect of the tax system

3 / 22


Aim of paper

aim of paper

  • to estimate non-compliance patterns of income under-reporting in Greece

    • by comparing the incomes reported in a large sample of tax returns in 2007 (incomes earned in 2006) with those observed in the EU-SILC survey of that year

    • redo the exercise for incomes earned in 2010

  • to estimate the distributional implications of personal income tax evasion in the general population

    • by using EUROMOD

4 / 22


T he paper1

the paper

  • introduction

  • methodology and data

  • results - discussion

  • conclusion

5/ 22


Empirical research

empirical research

  • Two main approaches

    1. Macroeconomic approach: use of macroeconomic indicators

    2. Microeconomic approach:use of microeconomic data

  • expenditure based method

  • discrepancy method: comparing two alternative and independent measurements of the same variable

    • comparing income declared to tax authorities to income declared to household income surveys

    • crucial assumption: individuals reveal their income to survey interviewers more truthfully than they do when filing their tax return

6 / 22


Discrepancy method studies

discrepancy method: studies

7/ 22


Our dataset

our dataset

1. A large panel data sample of income tax returns filed in 2007-2011 (incomes earned in 2006-2010)

  • 301,577 tax filers in 196,742 tax units (4.3% of tax filers in 2007)

    2. EU-SILC 2007 (incomes earned in 2006)

  • 14,759 individuals in 5,643 households

    • EU-SILC 2011 (2010 incomes) has not yet been released. Solution:

    • uprate EU-SILC 2007 (2006 incomes) to 2010

    • on the basis of estimates provided by the Bank of Greece, EL.STAT.

improvement\

8/ 22


Methodology 1

methodology[1]

1. Create comparable reference populations

  • both datasets were reduced to:

  • people reporting annual income from wages/pensions above €6,000

  • people reporting annual farming/self-employment income above €3,000

    (i.e. restrictive set of rules for filing a tax return)

    2. Create comparable income variables

  • gross incomes minus social insurance contributions

9/ 22


Methodology 2

methodology [2]

3. Allocate the reference population into 16 categories defined as combinations of 4 macro-regions and 4 income sources:

  • Focusing on income sources allows us to account for individuals earning income from multiple sources (‘moonlighting’)

improvement\

10 / 22


Methodology 3

methodology [3]

4. Create adjustment factors: ai,j= ỸRi,j/ ỸTi,j where:

ỸRi,j= average income from source j by people in region i in tax returns

ỸTi,j= average income from source j by people in region i in EU-SILC

5. Use these factors for the estimation of a ‘synthetic’ (i.e. adjusted for under-reporting) EU-SILC income distribution

  • introduction of a zero-mean random term around the estimated

    rates of income under-reporting by category

    6. Use EUROMOD to calculate tax liability and disposable income based on the original and the ‘synthetic’ EU-SILC income distributions

improvement\

11 / 22


T he paper2

the paper

  • introduction

  • methodology and data

  • results - discussion

  • conclusion

12 / 22


Results 1

results[1]

  • Under-reporting by income source and region (%)

13 / 22


Results 2

results[2]

14 / 22


Results 3

results[3]

  • Income - tax variables (2006)

Note: mean incomes/taxes are non-equivalised annual personal incomes/taxes in €. They are constructed excluding those earning zero or negative incomes/ paying zero tax. Actual total income tax receipts in 2006 were €8,318 million. The share of positive income earners paying non zero tax is 40.3% under full compliance and 34.4% under tax evasion.

15 / 22


Results 4

results[4]

  • Poverty and inequality (2006)

Note: poverty and inequality indices are computed on the basis of equivalised household disposable income (HDI). The poverty line is set at 60% of median equivalised HDI.

16 / 22


Results 5

results[5]

  • Personal income tax progressivity (2006)

Note: tax progressivity indices are computed on the basis of equivalised HDI. In the absence of any re-ranking of individuals pre and post-tax, the two indices are proportional.

17 / 22


Discussion

discussion

  • Income under-reporting:

    • varies widely by income source and region

    • is biggest at the two ends of the income distribution (U shape)

      • concentration of pensioners and wage earners in the middle of the distribution

    • reduces personal income tax revenues by 27.8%

      • 14.6% fewer persons paying on average 15.2% less tax

  • Tax evasion causes a slight increase in relative poverty but a significant increase in income inequality

  • It severely reduces the progressivity of the tax system

18 / 22


T he paper3

the paper

  • introduction

  • methodology and data

  • results - discussion

  • conclusion

19 / 22


Reasons for caution

reasons for caution

  • measurement & sampling errors

  • bias from the exclusion of people not filing a tax return

  • income uprating imperfect

  • assumption that people reveal their true income in EU-SILC

20 / 22


Policy implications

policy implications

  • fight against tax evasion

    • both fiscally important and politically crucial

  • refinement of audit targeting and audit coverage

  • policy making in the field of taxation should consider tax evasion’s distortionary effects in the intended progressivity of personal income tax

21 / 22


Further research

further research

  • add more dimensions in the construction of adjustment factors

  • perform sensitivity analysis

  • re-estimate 2010 under-reporting factors when EU-SILC 2011 becomes available

22 / 22


  • Login