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Tax behavior of Hungarian Enterprises 1996-2007 Results of Consecutive Enterprise Surveys. István János TÓTH (IE HAS) - András SEMJÉN (IE HAS) WB - IE HAS workshop, Budapest December 5 -6, 2007. Main topics to be covered. Outline of the problem Main characteristics of the survey samples
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Tax behavior of Hungarian Enterprises 1996-2007Results of Consecutive Enterprise Surveys István János TÓTH (IE HAS) - András SEMJÉN (IE HAS) WB - IE HAS workshop, Budapest December 5-6, 2007
Main topics to be covered • Outline of the problem • Main characteristics of the survey samples • Tax compliance and contractual discipline • Involvement in the underground economy • Opinions on tax system and tax administration • Some conclusions
Outline of the problems • Homogeneous sampling + Subjective data (=> tendencies and relations) • Corporate behavior with regard to tax evasion (unreported sales) • Market features => weight of underground economy • Business environment => involvement in underground economy
Distribution by size – pooled sample(1996, 1998, 2001, 2007)
Increase in the importance of export markets, 1996-2007 => The share of exporter firms (51_x%) is increasing
The share of import in total purchases is increasing1996-2007
Contractual, fiscal and financial discipline => Contractual discipline => Fiscal discipline => Financial discipline (payments obligations + fiscal) Infringement of financial discipline (BFD=1): => 1 if the company could not always meet in due time its payments obligations to other company during the last 12 months, or => if ever hat any delay in its social security contribution payments over this time span, or => if it ever had “fresh” tax arrears over this time span BFD=0 otherwise
Contractual discipline (BCD) deteriorated significantly, 1996-2007
Contractual discipline (BCD) deteriorated significantly, 1996-2006 => in all subgroups
Unreported sales: Hungarian economy (UNSALESH) and domestic competitors (UNSALESC), 1996-2007
Corporate view on unreported sales amongst competitors (UNSALESC) by export share, 1996-2007
Unreported sales: contractual partners (UNSALESP), 1996-2007 => unreported sales became less prevalent over time in the Hungarian economy
Corporate view on unreported sales amongst contractual partners (UNSALESP) by foreign ownership, 1996-2007 => less frequent amongst foreign-owned firms
Involvement in the underground economy– a feature of local markets, 1996-2007 => Significant positive correlation between competitors’ and business partners’ behavior (UNSAESP) and (UNSALESC)
Involvement of competitors in underground economy affects business prospects of company (BEXPCUE), 1996-2007 => Higher export share or foreign ownership: weaker impact
Opinions on tax system and tax administration => the business environment of firms likely deteriorated between 2001 and 2007
Impact of personal contact in tax authority (TAXPER) by company ownership, 1996-2007
Some conclusions • Fiscal and financial discipline all show visible improvement in 1996-2007 • The involvement in the underground economy is less frequent; but it has more impact on business prospects • Weight of underground economy => importance of local (market) level • 2001-2007: Deterioration in corporate opinions regarding tax policy and tax administration • 1996-2001: Likely decrease in corruption Explaining factors: 1-2: increase in the level of integration into the world economy; 1-2: structural changes (spillover effect) 3: the inclination of tax evasion is a self-supporting process 4: tax rules changes, government failures (non-based decisions); 5: steps to „Weberian bureaucracy” at tax office