Shadow economy and tax evasion. The Achilles heel of Greek economy. Determinants, effects and policy proposals

Abstract

Purpose This paper aims to bring into surface two major socioeconomic problems of Greece, tax evasion and shadow economy. Design/methodology/approach It examines the determinants and the factors that led to the formation and expansion of tax evasion and subsequently of black economy. Empirical data and related research are used to provide a clearer view of the existing situation. Findings Tax evasion and shadow economy are proved to remain two of the most severe problems that torture Greek economy. The factors that contribute the most to the formation of these phenomena are the lack of tax awareness, the tax burden, the structure of the tax system, the role of the state, the level of approvement of public authority, self-employment, unemployment and the level of organization of the economy. Except from the negative characteristics, positive ones are also identified, and certain policies are suggested so as to combat tax evasion and black economy. Originality/value The paper highlights two major issues that constitute the deadly weakness of the Greek economy, providing a holistic view of the current situation, identifying the roots of the problem and suggesting specific measures.