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Tax behavior of Hungarian Enterprises 1996-2007 Results of Consecutive Enterprise Surveys

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 1996-2007 Results of Consecutive Enterprise Surveys

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  1. 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

  2. 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

  3. Outline of the problems

  4. 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

  5. Main characteristics of the survey samples

  6. Main characteristics of the survey samples, 1996-2007

  7. Distribution by size – pooled sample(1996, 1998, 2001, 2007)

  8. Distribution by sector – pooled sample, 1996-2007

  9. The share of foreignowned firm is increasing, 1996-2007

  10. Increase in the importance of export markets, 1996-2007 => The share of exporter firms (51_x%) is increasing

  11. Increase in the importance of export markets, 1996-2007

  12. The share of import in total purchases is increasing1996-2007

  13. Tax compliance and contractual discipline

  14. 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

  15. Contractual discipline (BCD) deteriorated significantly, 1996-2007

  16. Contractual discipline (BCD) deteriorated significantly, 1996-2006 => in all subgroups

  17. Fiscal discipline improved, 1996-2007

  18. Financial discipline (BFD) improved, 1996-2007

  19. Financial discipline (BFD) by foreign ownership, 1996-2007

  20. Financial discipline (BFD) by size, 1996-2007

  21. Involvement in the underground economy

  22. Unreported sales: Hungarian economy (UNSALESH) and domestic competitors (UNSALESC), 1996-2007

  23. Corporate view on unreported sales amongst competitors (UNSALESC) by export share, 1996-2007

  24. Unreported sales: contractual partners (UNSALESP), 1996-2007 => unreported sales became less prevalent over time in the Hungarian economy

  25. Corporate view on unreported sales amongst contractual partners (UNSALESP) by foreign ownership, 1996-2007 => less frequent amongst foreign-owned firms

  26. Involvement in the underground economy– a feature of local markets, 1996-2007 => Significant positive correlation between competitors’ and business partners’ behavior (UNSAESP) and (UNSALESC)

  27. Involvement of competitors in underground economy affects business prospects of company (BEXPCUE), 1996-2007 => Higher export share or foreign ownership: weaker impact

  28. Corporate opinions on tax system and tax administration

  29. Opinions on tax system and tax administration => the business environment of firms likely deteriorated between 2001 and 2007

  30. Impact of personal contact in tax authority (TAXPER) by company ownership, 1996-2007

  31. Some conclusions

  32. 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

  33. http://econ.core.hu/~tothij

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