Recent evidence on the taxpayers’ reporting decision in Greece : a quantile regression approach

Abstract

This paper examines the responses of individuals to marginal tax rates in their reporting of income, using the 2009 individual tax return data for Greece. The method of regression quantiles is employed to provide evidence on behavioral responses at different points of the income distribution. The results reveal significant differences in the marginal tax rate reporting responses across income classes and for different occupational groups; whereas high income taxpayers have a very elastic response. As particular groups of taxpayers have more flexibility in misreporting tax liability also depends on the government’s effectiveness to control tax avoidance. Evaluation of the 2010 tax reform further reveals that misreporting of the occupational groups Rental Income and Wages & Salaries appears to be the highest. Policy recommendations regarding tax reforms should therefore take into account the reported income distribution involved and the selected policy objectives.