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Tax Behavior of Hungarian Enterprises (1996-2007) - Results of Consecutive Enterprise Surveys

This study analyzes the tax behavior of Hungarian enterprises from 1996 to 2007 based on consecutive enterprise surveys. It covers topics such as tax compliance, involvement in the underground economy, and opinions on the tax system and administration.

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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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