Tuesday, February 4, 2014

Not owed by a Grecian's earn

Because they don't stand on formality, say Francesco Pappadà and Yanos Zylberberg;
Simply put, when facing high taxes, firms do not only reduce their activity because of lower expected returns, but they also conceal more of it. Concealing production is costly for the government, because it implies that a part of the tax increase will not translate into additional tax revenues. In addition, the firms that become more informal are less able to attract external finance, and need to downsize their activity even further. This mechanism is to be expected in a country that is, like Greece, plagued by widespread tax evasion.
Plagued? By self-defense?

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