The crisis and tax evasion in greece what are the distributional implications
Download
1 / 23

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


  • 62 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.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha

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



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


ad
  • Login