Tax Spies

Tax evasion is so bad in Greece that the government wants to employee students, housewives, and tourists to report tax evasion.

Well, this shows that Greece is very desperate. But this policy also has two problems.

First, what happens if the undercover tax inspector colludes with the tax evader? Or if tax evaders
send their own people to know exactly how undercover tax inspectors work? In such case, the effectiveness of this program would be quite doubtful.

Second, there is a chance that there are a lot of nuisance cases. False or ill-willed reporting is likely to lead to higher costs both for the government and the businesses.

I believe a more effective way to deter tax evasion is to institute a whistle blower policy. Basically, if an insider reports strong evidence that leads to a prosecution, the insider reporting is rewarded handsomely. Whistle blower policy would lead to lower costs and higher prosecutions.

No policy is perfect but in dire situations (e.g. Greece), it may be best to implement the most effective policies to avoid a further downward spiral.