Transcript 1. EU-Turkey relations

Tax Morale and Compliance: Evidence from Small
and Medium Enterprises in Greece
Assoc. Prof. A. Bitzenis, Dr. P. Kontakos, Mr. P. Mitrakos
University of Macedonia, Thessaloniki
Thursday 13 November, 13.00-15.00, Section 1
Large conference Hall, UNWE
Jubilee 10th International Scientific Conference of Young Scientists
University of National and World Economy (UNWE), Sofia, 13 November 2014
Note: The current paper is presented under the auspices of the
THALES Research Programme. THALES Programme has been cofinanced by the European Union (European Social Fund - ESF) and
Greek national funds through the Operational Program “Education and
Lifelong Learning” of the National Strategic Reference Framework
(NSRF).
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Foreword to our Project
• Our aim is to research and measure the various aspects of
shadow economy in Greece, including corruption, tax avoidance,
social contribution avoidance, undeclared or illegal work, shelf
consumption, illegal acts (black or underground economy).
• It will cover all economic agents in Greece, such as citizens and
corporations (e.g. public and private individuals, companies and all
professional categories, etc.)
• The research is also performed at sector levels, e.g. to identify the
extent of tax evasion and corruption in the trading of oil in Greece.
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Foreword to our Project (cont.)
• It does not aim to the precise percentage regarding the
measurement of Greek shadow economy but aims to the qualitative
analysis of questionnaire results and the comprehension of the
problem.
• The implementation of our interviews, scientific games and
economic experiments (tax compliance games) will involve at least
2,000 individuals and business owners (in majority small
businesses).
• The project aspires to achieve numerous objectives, among which
the development of a relevant theoretical background, and
perform cross-country comparisons at regional level, but also
with country groups with advanced taxation systems.
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Agenda
1. Introduction
2. Aim of the paper
3. Research Methodology
4. Originality of the proposed research
5. Preliminary results from our pilot survey & interviews to Greek SMEs
6. Conclusions
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1. Introduction
• Various studies have been conducted in the past to determine if
ethical values, cultural characteristics and habits differ between
residents of different countries as well as whether these differences
can be measured and affect the economic behavior of citizens.
• One such field of research consists that of tax compliance and tax
ethics. These concepts while are studied by the economic science,
can not be explained and fully understood in purely economic
terms.
• This means that people - taxpayers do not act as purely
economic entities whose sole objective is that of maximizing profit
or utility.
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2. Aim of the paper
• To discuss the research methodology
• To present the innovativeness of the research
• To present preliminary results from our pilot questionnaire survey
with small and medium enterprises in Greece
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3. Research Methodology
• The method of empirical research is the use a questionnaire
survey on a random sample / structured interviews of SME
market participants with the aim of achieving countrywide coverage.
• Deployment of advanced econometric techniques will
supplement and enhance the results of the questionnaire research.
• Emphasis is given to the qualitative aspects and analysis of
questionnaire results in order to expose the behavioral patterns of
the various economic agents.
• The entire process of gathering the questionnaires is innovating
and is based on modern technologies (using e.g. mobile internet
and SMSs for the collection of the data, real time distribution of
the results, professional scanners designed for fast
recognition/reading and precise analysis of the end results, etc.). 8
4. Originality of the proposed research
• The originality is associated with the fact that never before in
Greece has been performed a similar research; also, this study is
situated at the peak of the current public and academic debate.
• Until now, the size of shadow economy in Greece has been
estimated only through indirect approaches, methods that are
easily applicable but also involve a high possibility of error; also,
are not sufficient to establish the factors that drive economic
agents to shift towards the underground economy.
• Our project, although recognizes the time consuming and expensive
nature of adopting a direct research approach (in order to
administer a high volume of questionnaires), it aims to be a pioneer
in understanding the phenomena of tax morale and tax behaviour in
Greece by using and analyzing primary data.
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5. Preliminary results from our pilot survey &
interviews to Greek SMEs
• The SME sector in Greece accounts for 99.9% in the total number of
enterprises, with the majority of them being micro enterprises.
• Using available statistics until the end of 2012, it is estimated that
the crisis has affected significantly the Greek SME sector in
terms of the number of enterprises, estimated to be 90 thousand
units, which stands even lower to its pre-crisis levels in 2005.
• According to first evidence, the contraction of Greece's GDP by
approximately 25% in total during the period 2008 to 2013, has
caused an increase in the number of corruptive actions per se,
such as those related to tax avoidance and evasion, undeclared
employment, etc. However, the average monetary equivalent
involved in the respective transactions has decreased.
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5. Preliminary results from our pilot survey &
interviews to Greek SMEs (cont.)
• On the contrary with Corruption Perception Index (CPI) which
ranks Greece among the prime improvers in 2013 , we can argue
that the level of tax morale in Greece during the crisis has
weakened.
• Greek SMEs attempt to compensate their lost income by tax
avoidance transactions, contribution evasion by employers and
employees for Social Insurance and other-Auxiliary Funds for
Employees.
• The complexity of tax law and the tax system are found to have
negatively impacted their tax compliance behavior, whereas
importance was assigned by the small business owners that
participated in the survey to the actual (high) level of tax rate
which tends to encourage corruptive behaviors.
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5. Preliminary results from our pilot survey &
interviews to Greek SMEs (cont.)
• The higher probability of audit by the tax authorities, appears
however to have altered in certain cases their attitudes towards
declaring, instead of concealing, their real income.
• Finally, we find that the stricter control mechanisms and
electronic governance (e-governance) have contributed to the
containment of tax evasion and social security contribution evasion,
due to the risks and penalties associated with the higher possibilities
of detection and the increased number of tax audits and inspections
carried out.
• As a result, overall, and in contrast to the reduction of the shadow
economy as a percentage of GDP from 28% before the crisis at
24% in 2013, as released by other Researchers (Bloomberg,
Schneider), we estimate that at the end of our full research analysis,
probably, this percentage will have exceeded 30% in 2013/2014. 12
6. Conclusions
• Preliminary evidence is presented from the pilot questionnaire
survey which has followed a multifaceted approach on a random
sample and structured interviews in the case of Greek SMEs which
was performed by the authors.
• We observe that particularly Greek micro and small businesses
have become less risk averse and more motivated toward
“game-playing” to tax avoidance and tax evasion, which can be
explained as a matter of their attempt to survive in the current crisis
conditions.
• According to these first results, there is evidence that the level of
shadow economy in Greece has increased in the period of
economic crisis, and particularly during 2010-2013, in contrast
with the indications of other relevant research and international
published indicators.
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