Eliminating tax evasion in Greece could cut deficit by a third

I just saw Adair Morse of U Chicago present a recent working paper on tax evasion in Greece that has been getting a lot of attention (e.g. Economist). She shows that banks give loans with payment amounts that exceed reported income and uses the amount banks lend people to back out how much actual income they have.

The totals are huge. They estimate a lower bound of 28 billion euros of unreported income. The foregone tax revenue from this could cut the 2008 deficit in half and the 2009 deficit by a third.

The worst offenders are the professional class: doctors, engineers, private tutors, accountants, financial service agents and lawyers. These occupations tend to have smaller paper trails and represent a substantial portion of parliament relative to the population and relative to comparable countries.