Tax Revenue

Greek Taxes

by Elaine Schwartz    •    Nov 29, 2011    •    396 Views

Having added property taxes to electric bills, the Greek government is shutting off the power to people who do not pay what they owe.

The response?

  • In a northern suburb of Athens, a mayor has assembled a group of electricians to reconnect people who lose their power. He has also made municipal attorneys available to defend tax “scofflaws.”
  • The annual tax obligations of one 86 year old man more than tripled. But he might not get any more bills because unions are occupying the power company’s billing center.
  • While government ministries still owe the power company more than $135 million euros, there are no plans to cut off their electricity. So, union workers shut down the Health Ministry’s power for 4 hours.
  • Sales of generators have risen.
  • Out of the 16,974 pools that satellite photos revealed in one affluent Greek suburb, only 324 homeowners declared them on a tax form.

The bottom line? Yes, these are random stories that might or might not be entirely accurate. However, with the Greek GDP cascading, the euro zone faces a gargantuan and perhaps unsolvable fiscal challenge.

Here is Merle Hazard’s “Greek Debt Song.”

The Economic Lesson

Off the books transactions that sidestep taxation compose a shadow or underground economy. For Italy, the shadow economy is estimated to total close to 20% of all economy activity while for Greece, maybe even 30%. In the US, 8% is the number that has been cited.

An Economic Question: Some say higher taxes solve a fiscal crisis by increasing government revenue while others believe that by discouraging business activity, they diminish revenue. Your opinion?

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