[sx]

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.

[nodata]

> 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]

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]

More efficient such as..?

[sx]

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.

[Ratufa]

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.

[davidw]

"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.

[jakarta]

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

[sx]

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.

[jakarta]

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]

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

[jakarta]

And you are arguing as if the Greek government is entitled to no taxes.

Greece provides its citizens with loads of social services. Someone/something has to pay for that. In the other EU countries, you know - the ones without sovereign debt crises (Germany for example), the taxes paid by citizens help pay for some of those services.

In Greece that doesn't happen because of the rampant tax evasion. So instead the government lies about its budget deficit, borrows tons of debt, and is now hoping for a bailout from some of the more fiscally responsible EU nations. German tax paying citizens are likely going to have to help subsidize Greek citizens who are unwilling to pay taxes.

[sx]

Greece does not provide its citizens with more social services than other European countries, I would say that they actually provide less. And although you are right about the deficit, again, the main problem is the inflated public sector with all its associated problems, like high pensions at a young age.

The private sector should not be burdened with this, and actually, it cannot afford to pay for this burden. If collecting more taxes is the solution here, it's certain that Greece will go bankrupt.

Regarding Germany vs the other European countries, what is easy to see is the direct contribution of Germany to the EU but the indirect benefits that Germany got because of the fixed currency are more difficult to see although very very important for them.

[artsrc]

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]

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.

[mfukar]

Really? Shut down public transportation, public health care, public telecommunications and public power? Do you have an equally brief transition plan?

[oiuygtfrtghyju]

Traditionally one then invades Poland - but this may not be an option for Greece.

[sx]

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]

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.

[sx]

A point with which I strongly disagree is that some public businesses are profitable so we should leave them alone. First of all, it's trivial to be profitable if you control a monopoly. Also, being profitable doesn't mean you are efficient, some things could be done much more effectively in the private sector. Also, by being overstaffed, even if profitable, you are not allowing all these people working for you to do something more productive.

Beyond that, when talking about profitability, you should consider pension plans and future obligations. Some of these businesses might have a positive balance sheet for the year but what's going to happen if you consider their future, inflated, obligations. A good example are the pensions the Public Electric Company employees get. They are mostly funded by the government.

Let's see why it screws up incentives: -- What do you think any of the people working in the public sector tries to optimize? Is it the successe of the business they are working on? Do they try to advance their careers? Or do they try to work as little as possible? -- If an employee is not good, is a government controlled company ever going to fire them? -- The guy who controls the supplies in the hospitals, does he ever have to report to somebody about that? -- Do you know a single person in the public sector that he has ever been promoted or fired because of his skills or lack there of?

[vitolds]

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.

[ataggart]

It hurts the government's creditors, as it should.

[patrickgzill]

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]

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.

[vitolds]

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