POLICY ANALYSIS RESEARCH UNIT

Department of International and European Economic Studies
Athens University of Economics and Business



Newsletter 2/2012

Distributional implications of tax evasion in Greece
By Manos Matsaganis & Chrysa Leventi

In this Newsletter we present our recent findings on the distributional impact of tax evasion in Greece. We compare reported incomes in a large sample of tax returns, with those in EU-SILC. We consider the latter, if not exactly 'true', at least closer to true incomes (since participants in a statistical survey have no material incentive to under-report their income). We use the European tax-benefit model EUROMOD to translate income under-reporting into tax evasion, and to estimate the effects of the latter on inequality and tax progressivity. We find that eliminating tax evasion would raise the total amount of personal income tax paid (by 33%), would reduce income inequality (by 3% to 8%, depending on the inequality index used), and would improve the redistributive impact of the tax system (by 29%).

The full text of the Newsletter is available here (in Greek).