Greece tax evasion fact of the day

More than 100% of the self-reported income of Greece’s professional classes is going toward paying off consumer debts.

From Mike Bird, there is more here, via MacroDigest.

Comments

Had an extended conversation on Greece over the weekend with a fellow volunteer I was paired with on a project. His father, a second-generation immigrant, early-retired back to the country. His opinion? The biggest problem Greece faces is an absolutely pervasive mentality that following the rules is for suckers.

That's the operative principle for a lot of the world. As more of the world ends up in North America and NW Europe, that's eventually how North America and NW Europe will operate. For that matter, a negative interest rate policy seems like an incentive to convert income into cash and other liquid assets that can't be traced by taxing authorities.

It must not be so bad, if a Greek who was otherwise assimilated to the US moved back there.

I agree that cultures outside those zones naturally exhibit this mentality, but many countries have substantially reduced corruption through sustained policy. Hong Kong, Chile, Estonia, Bhutan, Botswana and the UAE all at one point were much more corrupt but now have transparency scores comparable to the US. If a country like Singapore, filled with Chinese and Indians, run by the Chinese, and plagued with internal divisions, can make its culture transparent, then there's no reason the US can't make Chinese and Indian immigrants become transparent.

If a country like Singapore, filled with Chinese and Indians, run by the Chinese, and plagued with internal divisions, can make its culture transparent, then there’s no reason the US can’t make Chinese and Indian immigrants become transparent.

But what has Singapore actually done? Hong Kong is a little depressing because it is reverting to a more traditional Chinese norm. All the little billionaires that China relies on to run Hong Kong aren't doing it because they are convinced China is the motherland and they should support it. Which is why it turns out virtually all of them are in violation of some law or other. They are doing it because of the connections it provides that they may need one day.

As for Singapore, great country, I admire their leadership. But what you have is a ruling family that insists that the only allowable corruption is for them. They don't like to share. So Lee Kwan-yew appointed his family to virtually every job in the country that counts. His son is still Prime Minister. Both sons became Generals in the Army. The Central Provident Fund is the key and a Lee family member has never been that far away. If it wasn't his own family, I am sure Lee would agree with me too. It is just that he probably thinks it is all down to superior genes.

Singapore is filled with Chinese and Indians AND Malays.

No, I'm with Anti-Gnostic. My disdain for rules is certainly genetic.

Luckily the Irish immigrants around the turn of the previous century interbred with more pure, noble whites such as A-G, or else we'd have a Tammany Hall every other year!

Am I right?

You're right.

That's why you're here instead of there.

The biggest problem Greece faces is an absolutely pervasive mentality that following the rules is for suckers.

Fueled by wretched excess in the realm of state allocation of resources. If you had lower public expenditure and lower taxes, people might actually pay them.

That mentality is spreading here to the US. When high ranking politicians like Geithner, Rangel, et al can get away with tax evasion, then why should I respect the government's "rules?" When Lisa Jackson at the EPA can flout the rules and use secret email accounts under an assumed name and then seamlessly move to work for Apple, then why should I obey the rules? When the IRS breaks the rules and targets certain groups, then evades giving any information to the authorities for 2 years, why should I obey the rules.

The media have been very smug about their success in firewalling off Obama, but I'd say some institutional damage is being done - I sure hope it was worth it. (And, to be fair, the bureaucracy has been getting more and more brazen before Obama arrived, but refusing to touch any scandal because it might hurt your boyfriend was dumb. I also don't blame the Democrats or Obama - they are just being politicians.)

'When high ranking politicians like Geithner, Rangel, et al can get away with tax evasion'

Second stringers compared to this duo -

'By this time, Nixon campaign headquarters was receiving a flood of messages, calling on the senator to resign from the ticket.[23] When Eisenhower's train stopped for the candidate to make speeches, he faced protesters with signs reading "Donate Here to Help Poor Richard Nixon".[24] The influential Washington Post and New York Herald-Tribune both called for Nixon to leave the ticket, facts which Chotiner did not tell his candidate; Nixon learned them from a questioning reporter. Over 100 newspapers would editorialize about the Fund on the morning of September 20, opinion running two to one against Nixon.[25] As his train stopped in Eugene, Oregon, Nixon was met with protestors signs referencing his wife: "Pat, What Are You Going to Do With the Bribe Money?" and "No Mink Coats for Nixon—Just Cold Cash". He angrily responded with a phrase which would be echoed in the Checkers speech. After stating that there were no mink coats for the Nixons, the candidate said that he was "proud of the fact that Pat Nixon wears a good Republican cloth coat, and she's going to continue to."' http://en.wikipedia.org/wiki/Checkers_speech

'On October 10, 1973, Spiro Agnew became the second Vice President to resign the office. Unlike John C. Calhoun, who resigned to take a seat in the Senate, Agnew resigned and then pleaded no contest to criminal charges of tax evasion,[27] part of a negotiated resolution to a scheme wherein he was accused of accepting more than $100,000 in bribes[28] during his tenure as governor of Maryland. Agnew was fined $10,000 and put on three years' probation.[29] The $10,000 fine covered only the taxes and interest due on what was "unreported income" from 1967. ' http://en.wikipedia.org/wiki/Spiro_Agnew#Resignation

What's your point? Nixon was raked over the coals for maintaining an office account to finance political travel and sundries, and account supplied by campaign donations. Adlai Stevenson and John Sparkman did this as well without being raked over the coals.

As for Agnew, the tax evasion charge was a proxy in lieu of charging him with extortion, receipt of bribes, or receipt of public corruption.

Re: prior_approval

If you read the Checkers speech wikipedia article, you can see the Nixon incident really doesn't deserve to be classified together with Spiro Agnew's tax evasion. As the article points out, Nixon wasn't even the only candidate in the election to have such a fund. The Democrats' candidate for President -- Adlai Stevenson -- had a fund just like it.

Nixon did lots of crooked things later on, but having his supporters put up money into a kind of blind trust to pay for campaign office and travel expenses just isn't that crooked. If anything, it's better than what lots of modern politicians do which is gin up official business that requires air travel to get them to locations where they coincidentally also have big fundraisers.

Poor Spiro Agnew, a Greek-American, gets a lot of heat for accepting cash in a bag. But at that time, this was not a big deal (see for example Sup. Ct. justices Abe Fortas, and William O. Douglas, both involved in ethics scandals around the same time, in the late 1960s, http://en.wikipedia.org/wiki/Abe_Fortas#Ethics_scandal_and_resignation). Back then, accepting cash in a bag in secret was a big deal and illegal, but now, accepting a much more lucrative consulting and lobbying position on Gucci Gulch, after government service, is considered "normal". But is this any different? The quid-pro-quo is peddling influence.

Bonus Trivia: I foolishly filled out a mandatory income tax statement in Greece and put down, truthfully, that I make zero dollars from Greek sources. But since then, for the last ten years, I've been hounded by the Greek tax authorities (similar to what is done by California) asking me to pay tax, accusing me of underreporting, until I send in a letter saying I owe nothing (CA does the same thing to former residents, mailing you a notice demanding taxes, assuming you are guilty, with all kinds of threats of prosecution, until you write in and explain you don't owe taxes--guilty until proven innocent).

So they stop just because you send them a letter?

Just shows you need to elect a Republican to get the press to do their job.

I also don’t blame the Democrats or Obama – they are just being politicians
--
Rubbish. See Ron Nessen's account of Gerald Ford's attitude toward Richard Nixon. Ford was in a continual slow burn at Nixon because the man had violated codes that Washington politicians had observed among themselves. Keep in mind, Nixon's abuse of the IRS consisted of targeting a two-digit population of political enemies for audits, something the commissioner of internal revenue resisted. From the public exposure of the burglary unit at the Committee to Re-elect the President to Nixon's resignation elapsed 25 months and change. In 21 months, we still know very little about how far north of Lois Lerner the whole criminal enterprise extended. The arrogance of Douglas Shulman and John Koskinen really had no counterpart in the Nixon White House.

The fact that they didn't give Lois Lerner immunity tells us that the investigators are incompetent. Or it tells us that they don't think there's much of anything to be found.

It's not a mentality. It's the truth. When new taxes, or new tax enforcement measures are enacted, who do you think is hit the hardest?

The people who were already paying.

The entire system is constructed in a way that puts incredible burdens on those who follow the law. You wouldn't believe the red tape and bureaucracy involved with doing anything "the right way".

One of the regulatory agencies that I have to deal with said two very interesting things, the first being that they were not subject to the limits of the canadian Charter of Rights. The second, when I mentioned that it seemed that the rules could be ignored without penalty was told that they were for the honest people. Thank you very much.

The high functioning gypsies have been using this to their advantage for a while.

"The high functioning gypsies have been using this to their advantage for a while. "

+1

Lake Eurobegone where all the incomes are below average.

The ratio of public expenditure to domestic product in Greece is 0.59. Ample common provision and public services can be had for scarcely more than half that. Their whole political economy is f***ed, It's no wonder you have tax evasion up the wazoo.

Are the Greek voters the ones demanding increased public spending?

Surely the denominator is doing a lot of that, no? Actual spending is down ~30% from 2009, and yet this is the spending/GDP picture: http://www.acting-man.com/blog/media/2015/01/greece-government-spending-to-gdp.png

The decline in output has been on the order of 17%, so, no, the denominator is not doing most of the work there and real spending has not declined.

Spending/GDP is a nominal ratio.

Greek gov't spending is down about 16% from 2009, according to Eurostat (2014 numbers aren't out yet but I believe they're flattish from '13).

Nominal GDP is about 25% below peak.

So yes the denominator is doing the work there. Spending/GDP is up because GDP fell faster than spending, not because the Greek gov't has opted to increase spending since 2009.

It looks like a Leftist government has found its calling:

Going after tax evaders.

We can all agree on this, can't we?

Joe Biden says it's patriotic to pay taxes.

It's ROI positive to go after tax evaders. The failure of the government to do so speaks volumes about government officials.

Great idea. Suck all the resources out of the country so that it can be sent to Germany.

Remember in the U.S paying taxes is Voluntary senator Harry Reid said this 20 years ago! Taxation is Theft.

Taking government services without paying for them is theft, too.

"Taking government services without paying for them is theft, too. "

Is the US government going to aggressively prosecute any illegals that failed to file a 1099 form?

It's complicated. The government certainly doesn't have to defend Ukraine or fund the Departments of HUD, Education, Energy, Commerce, Agriculture or Interior on my behalf. I can probably make this list a lot longer.

We all can itemize things we don't like. But, then, what's the purpose of a democracy if you get to pick and choose what you want to pay for once the money has been spent.

The ultimate democracy would be to make all taxes purely voluntary.

Anti, Please tell me any government that makes all taxes voluntary? But, maybe you're right in a sense you didn't contemplate: since you created a constitution by agreement, and agreed to abide by the will of the majority when you voted, you did voluntarily choose what you got, so I guess you did voluntarily agree.

I should have expounded on that a bit. IIRC, about half the country consumes more in government services than it pays in taxes, and at that point the argument is over the service for which you're not paying your share of the freight. I don't blame welfare recipients for not paying the freight for military expeditions in the Middle East, for example.

Also, your point about agreements isn't valid. I'm here, and it would be too difficult and disruptive to move, but that doesn't mean I agree to the federal or any other constitution, or to the majority's decisions on issues.

The ultimate democracy

Why would I want that?

"since you created a constitution by agreement, and agreed to abide by the will of the majority when you voted"

Bill's terrible argument (which fundamentally misunderstands free will, surprise, surprise) suggests that sovereign citizens are correct. Bill, if I don't vote, do I have to follow your laws? Bill, If I was born in this country, and therefore had no choice in the matter, and have to pay punitive taxes and get permission to leave, what's my choice in the matter? Bill, if I put a gun to your head, do you have a choice? Bill do you even contemplate?

I'm skeptical that this data is exactly what it claims to be. I'm guessing it includes debt payments on business and investment property.

There's definitely a lot of tax evasion. But overall government revenues are at a typical level relative to GDP, in the mid-40s. If you're hoping to squeeze more revenues out of the upper middle class than by implication you're hoping there's a whole lot of hidden offshore savings piling up. I don't think there are a lot of direct gross tax revenue gains to be had. I do think there are a lot of indirect revenue gains to be had by increasing tax efficiency and fairness, but Syriza would need a much stronger mandate than it has to take on such an old system. I'm guessing the whole Syriza tax collection drive will be a big nothing and overall revenues this year will be significantly down.

Meanwhile they have finally published data on bank balance sheets for January which show that banks lost €31b of deposits in January. The ECB basically kept the Greek banking system right on the edge of running out of cash the whole time the bailout extension was being negotiated.

http://globalizedblog.com/2015/03/greek-banks-were-closer-to-cliff-than.html

Sorry, that was €31b of lost funding including about €13b of lost deposits and €17b of lost international interbank funding. That's a pretty savage bank run.

Why in the world would anyone with options continue to use the Greek banking system?

If you've spent your whole life in Greece and don't know how to internet to use a German bank, okay. Or if you don't have significant savings in Euros, which is a group hard to rely on for deposits by definition.

So who is keeping their money there and why?

People are lazy and/or idiots. Cyprus had clearly telegraphed that they were about to do a "bail-in", yet almost nobody took out their money.

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