One of the main issues in Italy is tax evasion. Discussing with my friend Jorge, we concurred that contrasting it could finance the huge debt affecting “the Italian boot”. May exist any rational “unethical” economic reason different from collusive behaviours to justify tax evasion? Jorge and I discussed on the negative effect that fighting tax evasion could have on growth, leading people to save and invest less than when they used to when they could cheat on the State. On the other hand, the government could target part of the restored income in public expenditure (by definition spurring growth). Also, I believe a tax system ruling progressively everyone, could have a re-distributional function, arguably stimulating growth. Finally, it is important to notice that part of the tax evasion in Italy comes from criminal organizations’ activity (Mafia, Ndrangeta, Camorra, Sacra Corona Unita), that surely do not have in their interest the growth of GDP.
Some figures: Italian debt (2009): 110% of GDP (ECB); TAX evasion: €333 billions in 2009, about 20% of GDP (contribuenti.it).
Also, I want suggest you to read the Economist’s review on Alesina et al. 2010, who studied in a recent paper if political economic history shows a negative relationship between austerity policies and the probability of being re-elected.
See you next post!