Economics versus Mathematics

I was reading this article today (in Romanian) and it reminded me of one of this country’s greatest problems: the complete inability to understand the difference between mathematics and economics.

I realize a lot of people don’t like numbers and when they see one or two of them together they start to get a headache and their eyes get blurry.

Nonetheless, let’s see if we can keep it really simple.

If I asked you to do the following math problem, what would your answer be?

What is 5% of 100?

I’m going to assume that your answer is 5. If so, congratulations you are correct and you can relax because the math portion of this quiz is now completed.

Now let’s pretend that you were kicked in the head by a donkey when you were a child and so now you’re officially fucking retarded. Therefore when you grew up, you had no choice but to become a politician.

It just so happens that you’re a politician in a very small country that has only 100 citizens. You decide to pass a law that says that every citizen must pay 5 cents in tax per year. How much tax are you going to collect?

What is 0.05 times 100?

If you said 5 then obviously you are not retarded enough to be a politician because this is the wrong answer. The correct answer is 2.

Now let’s imagine that you, as the cretinous governor of this island, have created a lot of governmental debt and so you wish to increase tax revenue and so you pass a new law that doubles the tax rate. Now each citizen must pay 10 cents a year. How much tax are you going to collect?

What is 0.10 times 100?

Obviously the correct answer is 2.1. Any other result means you are intelligent enough to tie your own shoes and are able to chew gum and walk at the same time.

What am I talking about? Where am I getting these numbers? Obviously they are imaginary but there’s a very real situation ongoing in Romania where the mathematical (also known as “real” numbers) are completely different from and exist in a different fucking universe than the actual numbers that exist, which is to say tangible lei flowing into government bank accounts on a daily basis.

Tax rates have increased all over the place lately (and many more being pushed off until 2013 so that they don’t interfere with the parliamentary elections later this year). And yet it isn’t hard to figure out that when tax rates rise, so will the rates of tax evasion. I should add here that as fees increase, fee evasion will increase, likewise duties, VAT, licenses, charges and any other monies that the government is trying to collect.

Maybe there’s some obscure canton in German-speaking Switzerland where the citizens are all scrupulous taxpayers but here in Romania there is nothing but chaos. And every time they increase the rates, the chaos increases while revenue does not. I don’t know how hard that is for people to understand (read: politicians) but down here on the ground every single person I know is a tax dodger.

Let me repeat that: every single person I know is a tax dodger.

I know people with their own businesses here. I know people who work for middle to larger companies. I know people who are small-time entrepreneurs. And literally every single one is defrauding the government in some way. Why?

A quote from the linked article:

Daca as lucra doar legal, n-as putea trai

If your Romanian is rusty, this means “If I worked [always] legally, I couldn’t live.” And that is exactly why every single person I know is also scamming or defrauding the government. You simply cannot live if you follow all the rules and pay every tax or fee or license or everything else. You just can’t.

I know taxi drivers (good people, not scammers) who have to run sometimes “off the clock” so that there’s no tax record. I know a guy who sells shisha tobacco who has to have it smuggled into the country because of the absurd tax rate on loose tobacco (far higher than on pre-rolled cigarettes). I know countless numbers of waitresses and waiters, store clerks, bar employees and restaurant people who work “under the table” and off the books because of the insanely high employee tax rates (100% or more of the employee’s salary).

I cannot even count the number of people I know who have officially underreported the selling price of real estate (again to avoid insanely high taxes). The vast majority of people I know who rent their apartments have no official contract at all and thus the local government receives no tax at all on their rental payments. For the people who do have rental contracts, the official rate listed is clownishly low (like 200 lei a month when in reality it is 300 euros a month), again to avoid taxes.

And so on and so forth, ad infinitum. This is why smuggling is so endemic in this country, because of the huge tax rates on many items. It’s why many people get paid one salary “on the books” and then get an envelope full of cash at the end of the month (off the books) from their employer. It’s why every single person in this country, including foreigners who live here, end up having to be Artful Dodgers of the first order. You have to be in order to survive.

Mind you, this is not even counting the outright embezzlement, malicious and greedy defrauding of the government and other intentionally criminal activities. I’m just talking here about ordinary people doing things just to survive.

And of course then the politicians begin to moan about how there’s never any money to do anything and the international bankers come knocking and want their money back and so the solution as always is to raise taxes, raise fees, increase the price of anything and everything, to cut subsidies and of course this means the people at the bottom get squeezed. The people at the top have too many friends and connections to get caught.

And the people in the middle? We know what happens to them. They get the hell out of Romania.

12 thoughts on “Economics versus Mathematics

  1. This situation is true in every country, not just Romania. Look at historical tax rates in the US, and the % of income paid by the population. There is a certain level when the rates are too low and the bureaucracy is simple enough, for it to be more of a hassle to avoid them. And there is a level when they are high enough that tax evasion (or at least legal avoidance) becomes worthwhile. Then again, I now live in a country with no taxes on individuals – except user fees (such as for highway use, or for telecommunications infrastructure) – and I think this is the most civilized way to go. But then again, in Europe and the West in general, the mindset is still the communist/fascist one, where the state must control everything and must run everything, directly or indirectly. Thus there is a very high need for government revenues there.


  2. Second that @hotcoffee! “Most people feel it’s unfair and pointless to give money to the state, even if they could, because the money would be pocketed by some corrupt jerk anyway.” – I’m one of those, and yes, as Sam, I also know everyone around trying to ditch the government taxes somehow … yaay! :)

    And great post Sam!


  3. Not all those “n-as putea trai” are honest, though. For the landlords who rent 3 or 4 apartments and have their own salary on top it’s not a matter of survival anymore, just greediness and habit. Most people feel it’s unfair and pointless to give money to the state, even if they could, because the money would be pocketed by some corrupt jerk anyway.


  4. @sunflowergits
    Jos palaria, dar principiul meu este ca eu (prin extensie: individul) pot cheltui mai bine banii decat statul. Asa ca evitand cat se poate de mult taxele, bonurile fiscale, etc – le las mai putini bani politicienilor si pentru licitatiile cu bani publici.

    Cand o sa aud ca statul (printre cei mai siguri clienti) a obtinut la licitatie un pix cu 1 leu iar pixul ala e 1,25 in oricare supermarket, atunci o sa imi schimb parerea.


  5. Veeery true, at least from my experience. I don’t know anyone who doesn’t scam either. And there’s a real impression of ‘honest scamming’ and ‘dishonest scamming’ too. I don’t blame them. As for the politicians, what can I say? It’s all been said before.

    Great post. Loved it, Sam :)


      1. Nu prea cumpăr de la magazinaşe pentru că scorurile lor mă sperie, iar dacă o fac (de câteva ori pe an) primesc bon fără să cer, probabil pentru că vânzătoarele nu mă cunosc şi n-au încredere în mine, mai ales că salut când intru, spun vă rog şi mulţumesc, iar în tot acest timp mă uit urât. Nu mă uit urât intenţionat, aşa m-am obişnuit de când aveam trei ani.


    1. Ei, lasa-ma, chiar asa primesti bon fiscal peste tot pe unde te duci?! Si atunci cand iti cumperi paine? Si atunci cand iti cumperi o shaorma sau covrigi sau o merdenea de la gogoserie? Si atunci cand te opresti pe marginea drumului sa cumperi o oala de lut (la Horezu, spre exemplu) sau alte chestii ce se mai vand pe acolo? Si atunci cand iti iei o lingura de lemn din piata? Si atunci cand te cazezi la o pensiune (pensiune, nu hotel)? Si atunci cand cumperi un buchet de flori de la floraria din colt?
      Nu stiu de ce, dar nu prea cred.


      1. Poţi să nu mă crezi, nici eu nu m-aş crede. Dar ca să te uimesc şi mai mult: nu cumpăr pâine -îmi fac, şaorma îmi cumpără bărbatul o dată pe an, deci bonul e în sarcina lui, la covrigi se dă bon, cel puţin la ăia numiţi Gigi, nu cumpăr oale de pe drum pentru că sunt mai scumpe decât la târguri (se numeşte preţ pentru naivi), la pensiune ia bonul omul de care ziceam în primul comentariu. Linguri de lemn nu folosesc şi nici nu cumpăr nimic niciodată de la ţigani pentru că n-am de gând să stimulez indirect furturile. Recunosc că legumele şi fructele le iau din piaţă fără bon, dar mereu am crezut că producătorii au nevoie doar de certificat de producător, nu şi de casă de marcat – mă refer la producătorii cu pământ sub unghii pentru că de la restul n-are rost să cumperi, iei mai ieftin de la supermarket. Chiar săptămâna asta am luat două punguţe cu porumbele, 1 leu/bucata de la o femeie. Pun pariu că le culesese de pe deal fără să aibă certificat de producător, cred că ai dreptate şi am păcătuit.

        P.S. Dacă mergi undeva şi nu primeşti bon, e suficient să nu te dai la o parte din faţa vânzătorului. Când te întreabă dacă mai vrei şi altceva îi răspunzi că da, bonul – funcţionează de fiecare dată. Eu aşa am făcut cu şoferii de pe transportul în comun, deşi un coleg de-al meu le spusese că nu ni se decontează transportul. Bonurile de la transportul în comun le mototolesc şi le dau la pisoi, se joacă fotbal cu ele.

        P.P.S. Cel mai hilar moment a fost când am cumpărat o bucată de covor care trebuia festonată pe lateralele mici. Vânzătoarea tot amâna să-mi dea bon şi mi-a zis să vin a doua zi cu covorul că îl festonează gratis. I-am atras atenţia că n-am de gând să plec fără bon, mai ales că aş cam vrea o dovadă că iau covorul de acolo, nu din altă parte. Ei bine, femeia aia s-a chinuit vreo 5 minute pentru o amărâtă de hârtie, cred că de 20 de ani de când are magazinul acolo dă bon cam la trei ani. Nici nu ştii câtă plăcere îmi face să le dau oamenilor palpitaţii.


    2. Te pomenesti ca si tigancile florarese iti dau bon! Sau n-ai cumparat niciodata flori? La tot cazul, daca macar jumatate din ce ai zis e adevarat inseamna ca locuiesti intr-un oras mic. In mod cert nu in Bucuresti pt ca atunci as fi sigur ca nu e adevarat.


      1. Cum să cumpăr flori de la florărese? Ha ha, mai bine îmi tai o mână. Cumpăr flori de grădină de la ţărăncile care aduc pătrunjel, mentă, busuioc sau de la florărie iarna. Şi da, ai dreptate, locuiesc într-un oraş mic-mic, în Bucureşti aş fi mâncată de vie.


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