Increasing Taxes Reduces Tax Revenues - Total Proof

If there was any doubt that increasing taxes reduces government tax revenues the Greek economic crisis proves it.

Despite massive increases in taxes over the past 3 years, tax revenues have actually declined. 3% decline from 2010-2011

Despite all the salary cuts somehow the Greek government has actaully managed to increase spending from 2010 to 2011 by nearly 5%.

Incredible. I can only assume the increased spending is on troika hospitality and increased interest payments

From Athens News

The country’s budget deficit continued to widen in November as an austerity-fuelled recession cancelled out much of the extra revenues the government was hoping to raise through emergency taxes, data showed on Tuesday.

The budget gap of the central government widened 5.1 percent year-on-year to 20.52bn euros, according to finance ministry figures for January to November.

This means that the state will likely miss its 2011 deficit targets and may need additional austerity measures to catch up with its budget goals next year.

The country has been consistently missing the deficit targets set by its international lenders under a bailout plan agreed last year, partly due to a deeper-than-expected recession but also because of its own failure to quickly implement reforms and crack down on tax evasion.

The economy is seen shrinking by 5.5 percent in 2011, its fourth consecutive year of recession. Under the 2012 budget plan approved last week the budget deficit is expected to narrow to 9.0 percent of GDP this year from 10.6 percent in 2010, a target the finance ministry said was still feasible.

This year’s budget goals largely hinge on a string of emergency taxes imposed in September after the country’s lenders threatened to withhold bailout funds if it did not meet its budget goals, a move that would have effectively rendered the country bankrupt.

“The current revenue shortfall is expected to be addressed in December, when the [emergency] tax measures will yield results,” the finance ministry said in the statement.

But a senior government official was less optimistic.

“If current spending and revenue trends continue, the deficit will be at about 10 percent of GDP and not at about 9 percent,” the official, who declined to be named, told Reuters before Tuesday’s budget data were announced.

Taxes

The new taxes included a charge of up to 5 percent on gross personal income as well as a controversial property tax which households must pay or face having their electricity cut off.

These measures have failed to visibly boost net tax receipts, which shrank by 3.1 percent year-on-year in the period from January to November, a slightly slower pace than their 4.1 percent drop in the first 10 months of the year.

Recession is dealing a further blow to the budget as the government steps up grants to social insurance organisations, whose revenues are drying up. Spending before interest payments rose by 3.0 percent year-on-year in January-November, according to Tuesday’s figures.

The data refer to the state budget deficit, which excludes items such as local authorities. Even though they are not identical with it, they are indicative for the general government shortfall, the benchmark for the EU’s assessment of the country’s economic policy programme. (Reuters)

	Jan-Nov 2011	Jan-Nov 2010	Change (%)	11-month 2011 target
Net revenue	43.833	45.235	-3.1	44.045
Spending	62.706	59.049	6.2	63.499
Public investment
-revenue	2.643	1.459	81.2	2.623
-outlays	4.287	7.161	-40.1	4.232
Deficit	20.516	19.516	5.1	21.063

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Increasing Taxes Reduces Tax Revenues – Total Proof

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