Question

Tax systems are crucial to the economic performance of a country. A flawed tax system could lead to detrimental consequences, among them is economic catastrophe. Greece is definitely among the countries whose flawed tax system is pushing the economy to the brink of collapse. Explain how the Greek tax system was at the root of the current Greek crisis.

Answer 1

1. Inefficient Pension System

Greece spent 17.5 percent of its economic output on pension payments, the most in the E.U., according to the most recent Eurostat data from 2012. But with existing cuts, that figure has fallen to 16 percent.

2. Benefits

Government employees have had some of the best worker benefits in Greece.Some workers received atypical bonuses for showing up to work on time, but these bonuses were paid so workers were not paid higher pensionable salary.t was a cheap way to give people more money without necessarily encumbering itself with paying higher pensions

3. Early Retirement

In 2013, Greece's retirement age was raised by two years to 67. According to government data, however, the average Greek man retires at 63 and the average woman at 59.And some police and military workers have retired as early as age 40 or 45

4. High Unemployment and Work Culture Issues

The unemployment rate is 25.6 percent in Greece.It’s kind of endemic and built into that culture that if I don’t get paid, I can’t pay you. It’s not the right foundation culturally for the economy to come out of this tailspin

5. Tax Evasion

The country has struggled to collect taxes from citizens, especially the wealthy, which is a problem when Greece's national debt is 177 percent of its GDP.Greece's far-left government has said it wants to target wealthy tax evaders, but creating a more equitable tax system has been challenging.

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