Anastasiou Athanasios, Kalligosfyris Charalampos and Kalamara Eleni

Correspondence: Anastasiou Athanasios, athanastas@uop.gr

Department of Management Science and Technology, University of Peloponnese, Greece

pdf (1255.08 Kb) | doi: https://doi.org/10.47260/bae/813

Abstract

The purpose of this paper is tο examine the causality relationships and the degree of interdependence, between the level of tax evasion in Greece and a set of deterministic factors, using annual data for the period 1995 - 2018. The research methodology employed includes testing for stationarity with the Augmented Dickey-Fuller (ADF) test, cointegration test according to Engle-Granger approach, estimation Error Correction Models (ECM) to investigate the short-run and long-run relationships, variance decomposition and impulse response analysis. The results indicate a significant interdependence, which is an important tool for pursuing a targeted and effective policy to fight tax evasion. More specifically, the survey showed that the level of tax rates, the level of unemployment, the Rule of Laws index, the level of GDP, the level of non-performing loans, the government efficiency, the corruption perception index and the level of final consumption expenditure, affect the size of tax evasion in Greece, significantly. In addition, the results of variance decomposition and impulse response analysis, support the above findings, providing a quantitative representation of the causality relationships between the factors under investigation and tax evasion.

Keywords:

  Macroeconomics, public economics, applied economics, tax evasion, Greece

References

Allingham, M. and Sandmo, A. (1972). Income Tax Evasion: A Theoretical Analysis, Journal of Public Economics, Vol. 1, 323-338.Alm, J., McClelland, H. and Schulze, W. (1992). Why Do People Pay Taxes?, Journal of Public Economic, Vol. 48, 21-28.Alm, J. And Yunus, M. (2009). Spatially and Persistence in U.S. Individual Income Tax Compliance, National Tax Journal, Vol. 62(1), 101-24Anastasiou A., Kalamara E. and Kalligosfyris C. (2020). Estimation of the size of tax evasion in Greece,  Bulletin of Applied Economics, Vol. 7(2), 97-107Andreoni, J., Erard, B. and Feinstein, J. (1998). Tax Compliance, Journal of Economic Literature, Vol. 36, 818-860Baldry, J.C. (1987). Income Tax Evasion and the Tax Schedule: Some Experimental Results, Public Finance, Vol. 42(3), 357-83Boame, A. (2009). Individual Tax Compliance: A Time-Series Regression Using Canadian Data 1987-2003, Compliance Research and Measurement Section, Baseline Research Paper.Brooks N. & A.H. Doob (1990). Tax evasion: Searching for a theory of compliant behavior. In Securing compliance: Seven case studies ed. ML Friedland 122-164 Toronto, University of Toronto Press.Chan, C.W., Troutman, C.S. and O’Bryan, D. (2000). An Expanded Model of Taxpayer Compliance: Empirical Evidence from the United States and Hong Kong, Journal of International Accounting Auditing and Taxation, Vol. 9, 83-103.Chelliah, R.J. (1971). Trends in Taxation in Developing Countries, International Monetary Fund Staff Papers,, Vol. 18, 254-331.Chiarini, B., Marzano, E. and Schneider, F. (2008). Tax Rates and Tax Evasion: An Empirical Analysis of the Structural Aspects and Long-Run Characteristics in Italy, IZA Discussion Paper, No. 3447.Christian, C. W. and Gupta, S. (1992). New Evidence on Secondary Evasion, The Journal of the American Taxation Association, Vol. 15(1) 72 – 93.Christou G. (2003). Introduction to econometrics, Gutenberg, AthensClotfelter, C. (1983). Tax Evasion and Tax Rates: An Analysis of Individual Returns, Review of Economics and Statistics, Vol. 65(3), 363-73Collins, J.H., Millron, V.C., and Toy, R.D. (1992). Determinants of Tax Compliance: A Contingency Approach. The Journal of the American Taxation Association, Vol.14, 1-29.Cowell, F. (1990). Cheating the government: The economics of evasion, Cambridge, Mass. and London: MIT Press.Crane, S. and Nourzad, F. (1985). Time Value of Money and Income Tax Evasion Under Risk Averse Behavior: Theoretical Analysis and Empirical Evidence, Public Finance, Vol. 40(3), 381-94Crocker, K., and Slemrod., J. (2005). Corporate Tax Evasion with Agency Costs, Journal of Public Economics, Vol. 89(9–10), 1593–1610.Cuccia A. (1994). The economics of tax compliance : what do we know and where do we go?. Journal of accounting literature,  Vol. 13.1994, p. 81-116Dubin, J. A., Michael J. G. and Louis L. W. (1987). Are We a Nation of Tax Cheaters? New Econometric Evidence on Tax Compliance, American Economic Review, Vol. 77(2), 240-245S.Dubin, J. A., and Wilde, L. L. (1988). An empirical analysis of federal income tax auditing and compliance, National Tax Journal, Vol. 41, 61–74.Engle και Granger (1987. Co-Integration and Error Correction: Representation, Estimation, and Testing, Econometrica Vol. 55, No. 2 (Mar., 1987), pp. 251-276Falsetta, D., Schafer, J. K., and Tsakumis, G. T. (2010). Tax Evasion: Audit Probability and the Moderating Role of Goal Conflict. Working Paper.Feige, E.L. and Cebula, R. (2009). America’s Underground Economy: Measuring the Size, Growth and Determinants of Income Tax Evasion in the U.S.Feinstein, J. S. (1991). An Econometric Analysis of Income Tax Evasion and its Detection, Rand Journal of Economics, Vol. 22(1), 14-35.Franzoni, L.A. (1999). Tax Evasion and Tax Compliance in B. Bouckaert and G. De Geest (eds), Ecyclopedia of Law and Economics, Cheltenham, UK and Northampton, MA, USA: Edward ElgarFranzoni, L. A. (2008). Tax Compliance, Encyclopaedia of Law and Economic, Boudewijn Bouckaert and Gerrit De Geest, eds., Edward Elgar.Frey, B. and Weck-Hanneman, H. (1984). The Hidden economy as an ‘unobservable variable, European Economic Review, Vol.26, 33-35.Ghura, D. (1998). Tax Revenue in sub-Sahara Africa: Effects of economic policies and corruption. International Monetary Fund. Working Paper, 1998/135.Goerke, L. and M. Runkel (2006). Profit Tax Evasion under Oligopoly with Endogenous Market Structure, National Tax Journal, Vol. 59, 851-857.Granger C. (1988). Causality, cointegration and control. Journal of Economic Dynamics and Control, 1988, vol. 12, issue 2-3, 551-559Hanno, M. D. and Violette, G. R. (1996). An Analysis of Moral and Social Compliance on Taxpayer Behaviour, Behavioural Research in Accounting, Vol.8, 163-189.Hinrichs, H. H. (1966). A General Theory of Tax Structure Change During Economic Development, Cambridge, Mass: Harvard Law School International Tax ProgramHite & Roberts (1992). Progressive Taxation, Fairness, and Compliance, Law and Policy Vol 16Jackson, B. R., and Milliron, V. C. (1986). Tax compliance research: Findings, problems and prospects, Journal of Accounting Literature, Vol. 5, 125–165.Jou, J. (1992). Income Tax Evasion: Theory and Empirical Evidence from the U.S. State-Level Data, Tax Year 1976-1989. Ph.D. Dissertation, University of Chicago.Joulfaian, D. (2009). Bribes and Business Tax Evasion, The European Journal of Comparative Economics, Vol. 6(2), 227-244.Joulfaian, D. and Rider, M. (1996). Differential Taxation and Tax Evasion by Small Business, National Tax Journal, Vol. 51(4), 676-87.Kamdar, N. (1995). Information Reporting and Tax Compliance: An Investigation Using Individual TCMP Data, Atlantic Economic Journal, Vol. 23 (4), 278-92.Kastlunger, B., Kirchler, E, Mittone, L, and Pitters, J. (2009). Sequences of Audit, Tax Compliance, and Taxpaying Strategies, Journal of Economic Psychology, Vol. 30(3), 405-418.Kastlunger, B., Dressler, S., Kirchler, E., Mittone, L., and Voracek, M. (2010). Sex differences in tax compliance: Differentiating between demographic sex, gender-role orientation, and prenatal masculinization (2D:4D), Journal of economic psychology, Vol.31, 542-552.Klepper, S. And Nagin, D. (1989). Certainty and Severity of Punishment Revisited. Criminology, Vol.27(4), 721-746.Long, S. and Swingen, J. (1991). The Conduct of Tax-Evasion Experiments: Validation, Analytical Methods, and Experimental Realism, in: P. Webley, H. Robben, H. Elffers and D. Hessing, Tax Evasion: An Experimental Approach. Cambridge University Press, Cambridge: 128-138Marrelli, M. (1984). On Indirect Tax Evasion, Journal of Public Economics, Vol. 25, 181-196Mason, R. and Calvin, L. (1978). A study of admitted income tax evasion, Law and Society Review, Vol. 12, 73–89.Mason & Lowry (1981). How Do We Affect Taxpayer Behavior?: The Case for Positive Incentives, Assistance or Enforcement, IRS 1990 Research ConferenceMilliron,V. and Toy, G. R. (1988). Tax Compliance: An Investigation of Key Features, The Journal of the American Taxation Association, Vol.41, 84 -103.Mittone, L. (2006). Dynamic behaviour in tax evasion: An experimental approach, The Journal of Socio-Economics, Vol. 35(5), 813-835.Negreponti-Delivani M. (1990). The Problematic Greek Industry And Some Of Its SolutionsNur-tegin K. D. (2008). Determinants of Business Tax Compliance. The B.E. Journal of Economic Analysis and Policy, Vol. 8(1), 1-26.Porcano, M. (1988). Correlates of tax evasion, Journal of Economic Psychology, Vol. 9,47-56Pommerehne, W. and Weck-Hannemann, H. (1996). Tax Rates, Tax Administration and Income Tax Evasion in Switzerland, Public Choice, Vol. 88, 161-170.Reinganum, J.F and Wilde, L.L. (1985). Income Tax Compliance in a Principal-Agent Framework, Journal of Public Economics, Vol. 26, 1-18.Riahi-Belkaoiu, A. (2004). Relationship between tax compliance internationally and selected determinants of tax morale, Journal of International Accounting, Auditing and Taxation, Vol. 13, 135– 143.Rice, E. M. (1992). The Corporate Tax Gap: Evidence on Tax Compliance by Small Corporations, in Why People Pay Taxes, edited by Joel Slemrod. Ann Arbor: University of Michigan Press, 1992Richardson, G. (2006). Determinants of tax evasion: A cross-country investigation, Journal of International Accounting, Auditing and Taxation, Vol. 15, 150–169.Richardson, M. and Sawyer, A. J. (2001). A taxonomy of the tax compliance literature: Further findings, problems and prospects, Australian Tax Forum, Vol. 16, 137–320.Sandmo, A. (2004). The Theory of Tax Evasion: A retrospective view, Norwegian School of Economics and Business Administration, Discussion Paper 31/04.Schram, A. and Gërxhani, K. (2006). Tax Evasion and Income Source: A Comparative Experimental Study. Journal of Economic Psychology, Vol.27(3), 402-422.Sillamaa, M. and Veall, M.R. (2000). The Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the 1988 Tax Flattening in Canada, Quantitative Studies in Economics and Population Research Reports, No 354, McMaster University.Slemrod, J. (2007). Cheating Ourselves: The Economics of Tax Evasion, Journal of Economic Perspectives, Vol. 21(1), 25-48.Song, Y. and Yarbrough, T. E. (1978). Tax Ethics and. Taxpayer Attitudes: A Survey, Public Administration Review, Vol. 38(5), 442–52Sookram, S. and Watson, P.K. (2005). Tax evasion, Growth and the Hidden Economy in Trinidad and Tobago, Working Paper, Sir Arthur Lewis Institute of Social and Economic Studies.Spicer, M.W. (1974). A Behavioral Model of Income Tax Evasion. Dissertation, Ohio State UniversitySpicer, M. W. and Lundstedt, S. B. (1976). Understanding Tax Evasion, Public Finance, Vol.21(2), 295-305.Strumpel, B. (1969). The contribution of survey research to public finance, in: A. T. Peacock (Ed.), Quantitative Analysis in Public Finance, 13–22. New York: Praeger.Tanzi, V. (1987), Quantitative Characteristics of the Tax Systems of Developing Countries, in The Theory of Taxation for Developing Countries, ed. by David Newbery and Nicholas Stern (New York: Oxford University Press), pp. 205-41.Tanzi, V. and Zee, H.H. (2000). Tax Policy for Emerging Markets: Developing Countries, National Tax Journal, Vol.53 (2), 299-322.Tedds (2006). Tax non-compliance and corporate governance: a comparative study. Working paper (2006)Tittle, C. (1980). Sanctions and social deviance: The question of deterrence, New York: Praeger.Torgler, B. (2003). Tax Morale in Transition Countries, Post-Communist Economies, Vol. 15, 357-381.Torgler, B. (2006). The Importance of Faith: Tax Moral and Religiosity, Journal of Economic Behavior and Organization. 61(1) 81-109Torgler, B. (2007a). Tax Compliance and Tax Morale: A Theoretical and Empirical Analysis, Cheltenham, UK: Edward Elgar.Torgler, B. (2007b). Tax Morale in Central and Eastern European Countries, in: Nicolas Hayoz and Simon Hug (eds.), Tax Evasion, Trust and State Capacities. How Good Is Tax Morale in Central and Eastern Europe? Bern: Peter Lang: 155-186.Torgler, B. (2011). Tax Morale and Compliance, The World Bank, Europe and Central Asia Region, Working Paper Series 5922.Torgler, B. and Murphy, K. (2004). Tax Morale in Australia: What Factors Shape It and Has It Changed Over Time?, Journal of Australian Taxation. Vol. 7, 298-335.Vogel, J. (1974). Taxation and Public Opinion in Sweden: An interpretation of recent survey data, National Tax Journal, Vol. 27(4), 499-513.Wallace, S. (2002). Imputed and Presumptive Taxes: International Experiences and Lessons for Russia, Andrew Young School of Policy Studies, Georgia State University, International Studies Program, Working Paper 02-03,Wallschutzky, I. (1984). Possible Causes of Tax Evasion, Journal of Economic Psychology, Vol. 5(4), 371-384.Witte, A. D., and Woodbury, D. F. (1985). The effect of tax laws and tax administration on tax compliance: The case of the U.S. individual income tax, National Tax Journal, Vol. 38, 1–13.