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The
Daily Gyro August 14, 2007 Greeks Write Off the Black Market So what message is the Greek government sending to its citizens when it’s incentivizing spending on frivolous entertainment in a society that needs little excuse to spend money on entertainment already? In an attempt to raise reporting of Greece’s black market economy, Greek officials recently announced tax deductions on Greeks’ entertainment spending. What falls under this new exemption is everything from restaurants and clubs, to things that normally in many countries would be taxed more, like alcohol. Cosmetic procedures like hair restoration and liposuction would also apparently be covered. The theory behind this deduction is that businesses that provide these services will be forced into more reporting when their customers need receipts to substantiate their deductions, thus reducing the tax evasion by these businesses. In most countries taxation is often used to promote or discourage certain behaviors. Here we’re used to seeing deductions for mortgage interest, student loans, hybrid cars, charitable contributions, and other desirable behaviors that help our economy and society, while being heavily taxed on gasoline, alcohol, cigarettes, etc. Similarly most health insurance won’t pay for cosmetic surgery or for something useful but seemingly voluntary like laser eye surgery. So what message is the Greek government sending to its citizens when it’s incentivizing spending on frivolous entertainment in a society that needs little excuse to spend money on entertainment already? In the end though, this whole system may backfire on the average Greek consumer as entertainment providers will be forced to increase their prices to make up for the fact that they actually have to report more income to the government. But who really gets hurt by this system is Greek-Americans visiting Greece during the summers who won’t have the benefit of deducting these increased amounts on their taxes back home.
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