Impact of tax rates on tax revenues in the financial crisis period: Evidence from Greece.

The tax-related literature contains many sub-surveys on the relationship between the effective tax rate and tax revenue. The relationship between tax rates and tax revenue, the relationship between earnings and tax rates and the relationship between economic growth and tax rates have been investigated. The impact of the new era financial crisis in the tax policies of countries in recession has not yet been investigated enough. Especially lacking are case studies of countries with extreme financial problems.

This study examines the impact of tax rates, i.e., return on tax policy, on tax revenues in a period of economic crisis. The case of Greece was chosen because the economic crisis in the country was mainly the result of tax evasion. During the last ten years of the crisis, the tax policies of different governments differed from one another and no one had as a result collected the needed amount of tax revenues. For that reason it is crucial to investigate the relationship between tax rates and tax revenues to determine the appropriate tax policy.

In order to control for the performance of tax policies applied, we used fiscal data for the period 2006-2016 for all taxpayers from the tax revenue base of the Independent Authority for Public Revenue. Also for the same period we examined and compared the profitability and tax returns of 3000 non-listed firms with the tax rate using panel data analysis. The data revealed that taxpayers' behavior did not yield the expected results. The profitability and profits of the firms were disproportionate to the tax rates. Especially in one part of the examined period with lower tax rates, there were less tax revenues in contrast with the Laffer curve theory.