I believe it was Keynes who said "if you owe the bank a £1,000 you have a problem, owe them a million, the bank has the problem.
Of course the numbers are bigger these days, but the principle still holds.
Greece has a variation on this, because the government is owed money by literally millions of people.
The simple answer is to collect the taxes, but the problems are multi layered.
Collecting taxes where you didn't collect them before is in effect a massive tax rate increase. People will go from effectively zero to 30-60%.
A simple way of avoiding this is to bribe tax officials, and/or politicians. One only has to look at the American pork barrel to see how 'legitimate' politicians 'help important local employers'.
The government will go after easy targets, which means ordinary workers, since the cash is easy to get. Rich people have resources that allow them to hide and move their money, that's why they are rich, and it would be rational for a rich person to spend 25% of the cash avoiding tax on the rest. That is a huge, highly motivated enemy, some of whom have 'links' to political figures.
Also, a good number are celebrities. Look at the soft treatment given to celebs when their chemical abuse kills themselves or others, or when their thugs beat up random people. The press will defend their own here, making it politically tough.
The mix of assets owned by rich Greeks will also cause distortions.
It's hard to move some to other countries, so the taxes will fall more on those with property than cash, and since the tax burden is on fewer people, the static asset owners will get it tougher than they would if you had a more equitable process.
Also, it's easier to tax income than wealth, because the movement creates a paper trail.
That means Greece will levy heavier taxes on people that generate wealth than people whose parents generated or stole wealth. That's not good for an economy.
One solution is to put up VAT (sales taxes), but firstly this affects the poor more, but also needs the society it is in not to be wholly corrupt. Also VAT increases the incentive to be corrupt on outside the formal economy.
Some EU VAT rates are 25%, yes really, and so we see why NewHavenCT sees pirated goods.
VAT works by 'value add'
If I buy goods from a legitimate firm, they charge me VAT.
When I sell them, I charge my customer VAT
The difference between the two numbers is the tax sent to the government.
So, if I buy legit goods, it is expensive for me not to charge VAT.
But if I buy pirated goods, odds are that they won't charge me VAT, and of course I won't need to charge it either.
Thus even before you allow for the fact that legit goods are more expensive at source, I can sell a pirate copy that cost me just as much for 25% less. Of course with pirated goods, my costs are lower anyway.
Same with services.
I would like to use an established firm of plumbers, but they have to add between 18% (in Britain) and 25% in much of Europe to their bill. That means black market suppliers of services can charge a lot less. Add in employment taxes et al, and the cash price of services can easily be 30% lower, and some will refuse to do business any other way.
This is an example of how high taxes cause what most people would see as immorality.
