Tax Evasion across Industries: Soft Credit Evidence from Greece / Nikolaos Artavanis, Adair Morse, Margarita Tsoutsoura.

Format:

Book

Author/Creator:

Artavanis, Nikolaos.

Contributor:

Morse, Adair.

Tsoutsoura, Margarita.

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w21552.

NBER working paper series no. w21552

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Tax Evasion across Industries

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2015.

Summary:

We document that in semiformal economies, banks lend to tax-evading individuals based on the bank's assessment of the individual's true income. This observation leads to a novel approach to estimate tax evasion. We use microdata on household credit from a Greek bank, and replicate the bank underwriting model to infer the banks estimate of individuals' true income. We estimate that 43%-45% of self-employed income goes unreported and thus untaxed. For 2009, this implies 28.2 billion euros of unreported income, implying foregone tax revenues of over 11 billion euros or 30% of the deficit. Our method innovation allows for estimating the industry distribution of tax evasion in settings where uncovering the incidence of hidden cash transactions is difficult using other methods. Primary tax-evading industries are professional services -- medicine, law, engineering, education, and media. We conclude with evidence that contemplates the importance of institutions, paper trail and political willpower for the persistence of tax evasion.

Notes:

September 2015.

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