31 ms·

The article points out many of the problems of the greek economy, like: * The inflated public sector * The power of the unions over the government * The corr

by sx 16y ago

The article points out many of the problems of the greek economy, like: * The inflated public sector * The power of the unions over the government * The corruption in certain areas of the public sector (e.g. hospitals) * The loose observance of laws But it mischaracterizes several important points, as it is commons with articles that describe such complicated issues after a minimal exposure of the journalist to the situation: * Tax evasion does not hurt the real economy. Especially not in a country like Greece where the public sector is so inefficient. It might be unfair for some but it doesn't really hurt the economy. In some cases it enables smart and motivated entrepreneurs to start their businesses. * Most public sector workers are not corrupted but they are part of the problem simply because of the fact that they work in the public sector. Think of DMV x1000. * The majority of Greeks are against the unions and would like to see the public sector shrink.

jakarta 16y ago
Tax evasion hurts when a government owes tons of money that it cannot pay back with the current tax revenue coming in.
- sx 16y ago
  But this is not the cause of the economic problems. The more appropriate solution would be to shut down the money-loosing public businesses (like the train org) and lay off as many people as needed from the public sector. This way, they will reduce government spending and will also allow people to do something more productive. More taxation will just slow down the economy even further.
  - deleted 16y ago
    [deleted]
  - jakarta 16y ago
    Greece has a debt crisis. The state borrowed some €216 billion and now cannot pay it. This isn't just some slow down caused by the business cycle that can be fixed by reducing taxes. Tax evasion costs the Greek government an estimated $20B a year. I would say that improving tax collection would significantly help Greece make payments on their debt. You have a big problem when there are millionaire doctors not paying a cent in taxes to the state. Sure, they have money wasting state enterprises, they could try to privatize some of them - but it is something that should not be done in a hasty manner. Rushes to privatize have led to massive failures (see Russia, parts of Latin America). So in order to get out of this mess they should 1. Restructure the debt to get a longer payment schedule 2. Improve their ability to collect taxes so that they can make some of those payments. 3. Work to privatize certain state owned businesses / infrastructure. ... or drop out of the EU, devalue currency, grow GDP
    - sx 16y ago
      You are arguing as if the Greek government is entitled at peoples' money no questions asked. What you are suggesting is to keep wasting the tax money to pay for the inflated public sector and all the money wasting state companies. They should first fix the problem, stop the wasting, and then try to collect more taxes. Reducing tax evasion, without solving the root cause, will help nobody, it will just get more money wasted. As far as your last point goes, I am not totally against dept restructuring. As long as they make sure they solve the root case of the problem
      - artsrc 16y ago
        If they are going to be good citizens, then Greeks must not only pay their taxes, they must also take responsibility for fixing their government, reducing waste, and stamping out their culture of corruption.
        sx 16y ago
        I don't think I disagree with you. My whole argument in these posts is that tax evasion, although very real, did not lead Greece to this mess neither will its reverse take it out. The problem is the bloated public sector with all its related problems. I think fixing that should be the first step towards a real solution.
        davidw 16y ago
        That's obviously a large part of the problem - to claim otherwise would be silly. But the overarching theme of the article is how everyone is out to "get theirs" and screw the next guy. This includes both the unions who got wages and benefits far out of proportion to the value of their work, as well as many people cheating on their taxes. It's a vicious circle, because when you see the next guy cheating and coming out ahead because of it, you are more inclined to cheat yourself, or grab what you can, the consequences for society be damned. I think this has a perverse effect on markets in general: when you're pretty sure the next guy is out to screw you, rather than just make a fair trade, it erodes faith in markets and capitalism.
  - mfukar 16y ago
    Really? Shut down public transportation, public health care, public telecommunications and public power? Do you have an equally brief transition plan?
    - oiuygtfrtghyju 16y ago
      Traditionally one then invades Poland - but this may not be an option for Greece.
    - sx 16y ago
      I am not advocating something that extreme here. Not sure how familiar you are with Greece. Each of these organizations is overstaffed to a great extend. Then some of them are totally useless, like the public railroad. On the top of that there are businesses that would be very healthy in the private sector (see banks) and that the government has absolutely no reason to be in. The fact that the government is actually in those businesses, profitable or not, screws up the incentives of everyone involved.
      - mfukar 16y ago
        I happen to be somewhat familiar, since I've been living there for 26 years. The majority of state enterprises (or those the state has a share in) right now are profitable, with the notable exceptions of a) railroads and b) the off-the-books units created by ministries to handle short-term tasks. Could they benefit from a restructuring and would lay offs be helpful? Probably so. Does the state's involvement in public corporation screw up incentives? Telecommunications is a good example of why not. Banks still don't convince me; they pay taxes with interest rates significantly less than 18-20%, which is the norm and they have resisted any and all attempts of the state for policy changes. Personally, I am more concerned with other issues: the legislation that often proves to be shortsighted and inefficient, limited (and that's a euphemism) opportunities to young entrepreneurs, poor education, but the one thing that bugs me the most is that Greeks (yeah, I'm one of them) have no regard for public interest. The why is a longer story than what can fit in this post. PS. You hinted to "shut down the money-loosing public businesses" as the "more appropriate solution"; if you're not advocating for it I may have to brush up on my English comprehension skills.
- ataggart 16y ago
  It hurts the government's creditors, as it should.
- vitolds 16y ago
  It hurts the government, but the institutions that were dumb enough to lend Greece should be also accountable. Of course if Greece defaults, German taxpayers are likely to pick up the tab so it sucks for them.
patrickgzill 16y ago
I upvoted you because you make a valid point ... what exactly, are the government services that Greeks who "should" be paying their taxes actually receiving?
- _delirium 16y ago
  One big group of tax evaders are doctors, who like to play both sides of the game. They accept large government subsidies and equipment on the one hand, and run off-the-books side businesses with that equipment on the other hand. Sometimes the side business isn't even very "side": doctors frequently demand and receive under-the-table cash payments to "expedite" service in the state hospitals. They also, of course, didn't pay tuition for their medical degrees--- their education was paid for by the people who actually pay taxes.
davidw 16y ago
"The loose observance of laws" and "tax evasion" are one and the same. A big point I get from the article is that everyone is just looking out for themselves, with little regard for law or society. Want to pay less taxes? Fine, vote in the local version of Thatcher, but don't cheat. That leads to a system where everyone picks and chooses which laws they want to follow.
nodata 16y ago
> Tax evasion does not hurt the real economy. You sound like someone from Greece trying to justify tax evasion - are you Greek? What is the "real economy"?
- sx 16y ago
  I am not advocating tax evasion. I think, US for example, is a great place to do business, as opposed to Greece, because the letter of the law is followed and the rules are clear to everyone. I am just saying that the Greek government was so inefficient and the public sector so bloated, that in some sense tax evasion was helping put people's money at more efficient uses.
  - nodata 16y ago
    More efficient such as..?
    - sx 16y ago
      Such as building their own private businesses and employing other people in the private sector. For example, it is much more beneficial to the country to build, say a new hotel (as this is Greece's biggest industry), instead of wasting the money on more public-railroad-type of money wasting businesses.
vitolds 16y ago
good points. if greeks started paying all the taxes, the private sector would cease to exist.
Ratufa 16y ago
The problem with tax evasion in a democracy is that, when combined with a government's ability to borrow money, it removes the one of the main reasons why voters should care about how much the government spends. If you don't pay taxes, government spending is free money, at least until the debt burden becomes obviously unsustainable and things start falling apart as a result.

by sx 16y ago

jakarta 16y ago

Tax evasion hurts when a government owes tons of money that it cannot pay back with the current tax revenue coming in.

sx 16y ago
But this is not the cause of the economic problems. The more appropriate solution would be to shut down the money-loosing public businesses (like the train org) and lay off as many people as needed from the public sector. This way, they will reduce government spending and will also allow people to do something more productive. More taxation will just slow down the economy even further.
- deleted 16y ago
  [deleted]
- jakarta 16y ago
  Greece has a debt crisis. The state borrowed some €216 billion and now cannot pay it. This isn't just some slow down caused by the business cycle that can be fixed by reducing taxes. Tax evasion costs the Greek government an estimated $20B a year. I would say that improving tax collection would significantly help Greece make payments on their debt. You have a big problem when there are millionaire doctors not paying a cent in taxes to the state. Sure, they have money wasting state enterprises, they could try to privatize some of them - but it is something that should not be done in a hasty manner. Rushes to privatize have led to massive failures (see Russia, parts of Latin America). So in order to get out of this mess they should 1. Restructure the debt to get a longer payment schedule 2. Improve their ability to collect taxes so that they can make some of those payments. 3. Work to privatize certain state owned businesses / infrastructure. ... or drop out of the EU, devalue currency, grow GDP
  - sx 16y ago
    You are arguing as if the Greek government is entitled at peoples' money no questions asked. What you are suggesting is to keep wasting the tax money to pay for the inflated public sector and all the money wasting state companies. They should first fix the problem, stop the wasting, and then try to collect more taxes. Reducing tax evasion, without solving the root cause, will help nobody, it will just get more money wasted. As far as your last point goes, I am not totally against dept restructuring. As long as they make sure they solve the root case of the problem
    - artsrc 16y ago
      If they are going to be good citizens, then Greeks must not only pay their taxes, they must also take responsibility for fixing their government, reducing waste, and stamping out their culture of corruption.
      - sx 16y ago
        I don't think I disagree with you. My whole argument in these posts is that tax evasion, although very real, did not lead Greece to this mess neither will its reverse take it out. The problem is the bloated public sector with all its related problems. I think fixing that should be the first step towards a real solution.
        davidw 16y ago
        That's obviously a large part of the problem - to claim otherwise would be silly. But the overarching theme of the article is how everyone is out to "get theirs" and screw the next guy. This includes both the unions who got wages and benefits far out of proportion to the value of their work, as well as many people cheating on their taxes. It's a vicious circle, because when you see the next guy cheating and coming out ahead because of it, you are more inclined to cheat yourself, or grab what you can, the consequences for society be damned. I think this has a perverse effect on markets in general: when you're pretty sure the next guy is out to screw you, rather than just make a fair trade, it erodes faith in markets and capitalism.
- mfukar 16y ago
  Really? Shut down public transportation, public health care, public telecommunications and public power? Do you have an equally brief transition plan?
  - oiuygtfrtghyju 16y ago
    Traditionally one then invades Poland - but this may not be an option for Greece.
  - sx 16y ago
    I am not advocating something that extreme here. Not sure how familiar you are with Greece. Each of these organizations is overstaffed to a great extend. Then some of them are totally useless, like the public railroad. On the top of that there are businesses that would be very healthy in the private sector (see banks) and that the government has absolutely no reason to be in. The fact that the government is actually in those businesses, profitable or not, screws up the incentives of everyone involved.
    - mfukar 16y ago
      I happen to be somewhat familiar, since I've been living there for 26 years. The majority of state enterprises (or those the state has a share in) right now are profitable, with the notable exceptions of a) railroads and b) the off-the-books units created by ministries to handle short-term tasks. Could they benefit from a restructuring and would lay offs be helpful? Probably so. Does the state's involvement in public corporation screw up incentives? Telecommunications is a good example of why not. Banks still don't convince me; they pay taxes with interest rates significantly less than 18-20%, which is the norm and they have resisted any and all attempts of the state for policy changes. Personally, I am more concerned with other issues: the legislation that often proves to be shortsighted and inefficient, limited (and that's a euphemism) opportunities to young entrepreneurs, poor education, but the one thing that bugs me the most is that Greeks (yeah, I'm one of them) have no regard for public interest. The why is a longer story than what can fit in this post. PS. You hinted to "shut down the money-loosing public businesses" as the "more appropriate solution"; if you're not advocating for it I may have to brush up on my English comprehension skills.
ataggart 16y ago
It hurts the government's creditors, as it should.
vitolds 16y ago
It hurts the government, but the institutions that were dumb enough to lend Greece should be also accountable. Of course if Greece defaults, German taxpayers are likely to pick up the tab so it sucks for them.

patrickgzill 16y ago

I upvoted you because you make a valid point ... what exactly, are the government services that Greeks who "should" be paying their taxes actually receiving?

_delirium 16y ago
One big group of tax evaders are doctors, who like to play both sides of the game. They accept large government subsidies and equipment on the one hand, and run off-the-books side businesses with that equipment on the other hand. Sometimes the side business isn't even very "side": doctors frequently demand and receive under-the-table cash payments to "expedite" service in the state hospitals. They also, of course, didn't pay tuition for their medical degrees--- their education was paid for by the people who actually pay taxes.

davidw 16y ago

"The loose observance of laws" and "tax evasion" are one and the same. A big point I get from the article is that everyone is just looking out for themselves, with little regard for law or society. Want to pay less taxes? Fine, vote in the local version of Thatcher, but don't cheat. That leads to a system where everyone picks and chooses which laws they want to follow.

nodata 16y ago

> Tax evasion does not hurt the real economy. You sound like someone from Greece trying to justify tax evasion - are you Greek? What is the "real economy"?

sx 16y ago
I am not advocating tax evasion. I think, US for example, is a great place to do business, as opposed to Greece, because the letter of the law is followed and the rules are clear to everyone. I am just saying that the Greek government was so inefficient and the public sector so bloated, that in some sense tax evasion was helping put people's money at more efficient uses.
- nodata 16y ago
  More efficient such as..?
  - sx 16y ago
    Such as building their own private businesses and employing other people in the private sector. For example, it is much more beneficial to the country to build, say a new hotel (as this is Greece's biggest industry), instead of wasting the money on more public-railroad-type of money wasting businesses.

vitolds 16y ago

good points. if greeks started paying all the taxes, the private sector would cease to exist.

Ratufa 16y ago

The problem with tax evasion in a democracy is that, when combined with a government's ability to borrow money, it removes the one of the main reasons why voters should care about how much the government spends. If you don't pay taxes, government spending is free money, at least until the debt burden becomes obviously unsustainable and things start falling apart as a result.