European policy makers who are considering raising tax rates as a way to increase revenue in the aftermath of the financial crisis should put greater emphasis on enforcing existing tax laws, says Zoë Kuehn of the Universidad Autonoma de Madrid in Spain. If countries such as Greece, Italy, Portugal, and Spain were to adopt Finland’s vigorous level of enforcement, their tax revenues would increase by an average of 12%, Kuehn says. In Greece alone, $49 billion worth of legal goods and services, about $4,380 per capita, escaped taxation in 2001-2002.

Source: Tax Rates, Governance, and the Informal Economy in High-Income Countries