Abstract

http://ssrn.com/abstract=2109500
 
 

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Measuring Income Tax Evasion using Bank Credit: Evidence from Greece


Nikolaos T. Artavanis


University of Massachusetts at Amherst, Isenberg School of Management

Adair Morse


University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Margarita Tsoutsoura


University of Chicago - Booth School of Business

September 25, 2015

Chicago Booth Research Paper No. 12-25
Fama-Miller Working Paper

Abstract:     
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 bank’s 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.

Number of Pages in PDF File: 66

Keywords: Tax Evasion, Soft Credit

JEL Classification: H26, G21, H00


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Date posted: July 17, 2012 ; Last revised: September 28, 2015

Suggested Citation

Artavanis, Nikolaos T. and Morse, Adair and Tsoutsoura, Margarita, Measuring Income Tax Evasion using Bank Credit: Evidence from Greece (September 25, 2015). Chicago Booth Research Paper No. 12-25; Fama-Miller Working Paper. Available at SSRN: http://ssrn.com/abstract=2109500 or http://dx.doi.org/10.2139/ssrn.2109500

Contact Information

Nikolaos T. Artavanis
University of Massachusetts at Amherst, Isenberg School of Management ( email )
121 Presidents Drive
Amherst, MA 01003
United States
Adair Morse
University of California, Berkeley - Haas School of Business ( email )
545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Margarita Tsoutsoura (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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