It should not be forgotten that tax evasion is always! morally superior to paying taxes. With taxes paid a criminal organisation gets supported. And a person paying taxes, even if only at gunpoint, is therefore helping criminals to maintain their dirty business and is jointly responsible for every crime they commit.

It was a good idea to show that there's no real distinction between "government" and "bad government" as all government is inherently bad because it solely and always rests upon force and coercion.

"CNN is the Bill Clinton of liberal media... "

I thought CNN was anti-smoking.

Forget the stupid premise of CNN's reporting. The facts are wrong. The fact is that "shadow economy" correlates with the tax burden. The stereotype or myth is that the "north", e.g. Scandinavia, works well because they are honest and pay their taxes. In fact, the "shadow economy" was always estimated to be around 20% in Denmark and Sweden back in the late 1980s. Within small business tax avoidance is rampant and de rigeur in Scandinavia.

In Denmark they even had an ad campaign on commuter rail (and probably other media) a few years ago to try to "fight" the shadow economy. Typical guilt trip stuff showing a "greedy" handyman and saying that he is cheating society. A key difference between north and south is that the punishment for economic crimes in Scandinavia are extremely onerous (and I am not exaggerating) typically exceeding murder and rape. Therefore, you have to be more clever and less brazen about it, which probably leads to an under-estimation of the "shadow economy" in Scandinavia. In fact in the late 1980s I remember that some "experts" talked about that it could easily be more than 25% in Denmark.

Here is an IMF paper on the topic from 2002 by the same Schneider:
Click to view link

Note the following:
"In the 21 OECD countries surveyed the shadow economy has been growing for 30 years-doubling from less than 10 percent of GDP in most of these countries in 1970 to 20 percent or more of GDP by 2000 in Belgium, Denmark, Italy, Norway, Spain, and Sweden. Growth has also occurred in countries with smaller shadow economies; in the United States, for example, the shadow economy doubled from 4 percent of GDP in 1970 to 9 percent in 2000."

I didn't know that they had olive trees in Norway, CNN.

Switzerland is "only" 9%. In fact you can probably graph VAT % vs. % shadow economy and find a very close fit. The US and Switzerland have similar VAT (or sales tax) levels while the Eurozone is typically 20% with 25% in Scandinavia.

I was not implying that the poor or very poor could easily avoid a large portion of their taxes. As I said in the post the scale of tax avoidance by ordinary people does not at all compare with that practiced by corporations. I was mearly pointing out that it is quickly increasing in ways that have not been large scale in the recent past and that this is being done at all income levels. Much of the tax avoidnance at lower income levels is not even done with the idea of avoiding taxes, for instance gardening. Our perspective as taxpayers differs greatly from those in government, especially those with enormous deficits, which now includes almost all of them. Many will see avoiding taxes via barter as something to be stopped to increase revenue. Some types of barter may be outlawed others might be taxed. We have already seen individuals fined, jailed and in other ways stopped from giving away food, one of the most innocuous activities imaginable. I am sure that governments interfering with what was previously tax avoidance by converting it into tax evasion will cause backlash, especially in hard times, nevertheless they will. Even though that was not stated in the previous post, that was my point. I shall endeavor to be clearer in the future.

"Legal tax avoidance" is more often than not not available to the practitioners of the "shadow economy", since they are frequently on the bottom of the economic food chain. They have no high priced tax lawyers. They can't afford any. They're taxi drivers, fishermen, waiters, lace makers, cleaning ladies, gardeners, etc. that make much less than the people that sell tax avoidance advice. Yet these are the ones that get the brunt of the blame for not paying "their fair share".

The wealthy that can afford expensive tax advice are, of course, practicing "legal tax avoidance" which is well and good. The tax codes seem to be unfairly slanted towards that group. Maybe the legislators listen to them more intently?

Shadow economy seems like a hard thing to pin down since it is all hidden. Just taking a snapshot of it seems to be beyond the capabilities of the governments trying to tax it. Following such a phenomenon through time is certainly not possible. All of this deals with illegal tax evasion. Legal tax avoidence is growing by leaps and bounds. Just the increased gardening in the last few years adds up to alot but it does not even compare with large scale corporate bartering. Just a web search lists many companies selling software and classes on how to do it. Legislatures and regulators must be tempted to find ways to tax it. The ease of communication afforded by the internet will make barter much easier than it has been in the past. Since so many companies are facilitating large scale corporate barter others will probably try to do the same thing for small scale transactions, though they may not be able to compete with similar free services.

Most of the "shadow economy" Greeks don't make enough in their occupation to be able to eat and pay "their fair share" too. Few people seem to understand how little they really do make from their olive trees, their small fishing boats, their inexpensive souvenirs, and their small tabernas. The Greeks I've met in the small villages are very hard working, absolutely honest (except possibly at taxpaying, which doesn't count since taxes are a form of theft) and are not accumulating large fortunes. They drive old scooters and Piaggio trucks, not new BMWs. Their homes are clean and modest.

@Daily Bell: "A Quadrillion dollars of silver? Hm-mm not sure there's that much around ... "

Patience grasshopper -- all things come to she who waits. There were many quadrillion Zimbabwe dollars of silver around before the time came that no one would exchange their silver for Zimbucks anymore.

Excellent essay! The problem is so few understand that it's the trillions that are being stolen at the top rather than a few billion at the lower levels of society that is causing our economic malaise. I chalk that up to very effective PR from the Power Elites. I wish more people read this blog.

Are derivatives legit? Do derivatives have something to do with JP Morgan short selling silver?

Reply from The Daily Bell

A Quadrillion dollars of silver? Hm-mm not sure there's that much around ...

Just as black market activity kept the suffering of Europe's former Communist nations from being even worse than it was, tax evasion everywhere has made the current depression in the "free world" more bearable than it would otherwise be.

So the productive person who evades taxes and manages to hold on to more of his earnings is a parasite, and the institution which produces nothing and feeds on the earnings of the productive class has been unfairly starved because it was denied access to some of the wealth of the productive class. What's next? Will burglars file a class action lawsuit against homeowners who have unpickable locks claiming unfair treatment of an occupation?

CNN: "According to a 2007 paper by Austrian economist Friedrich Schneider, the shadow economy in Italy accounted for 22.3% of gross domestic product (GDP), that of Spain 19.3%, Portugal 19.2% and Greece a staggering 25.1%. By comparison, the U.S. shadow economy was 7.2% of GDP"

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"Shadow economy", eh? Assuming that the numbers are fairly correct - isn't it funny, then, that REAL ECONOMIC ACTIVITY, that is to say without government meddling, is more than three times higher (as a percentage of "GDP") in Greece than in the US of A? "Staggering" indeed.

LOL