Unofficial economic activities and fiscal discipline in Hungary : as mirrored in consecutive enterprise surveys on tax behaviour

The paper focuses on a segment of the hidden economy, i. e. on unofficial (unreported) economic activities of registered medium and large enterprises in Hungary. First we place the problem into a broader context, then we delimit those segments of unofficial economic activities our surveys are able to catch. The data from our 1996,1998 and 2001 enterprise surveys put us into a unique position: we are able to analyse the dynamics of some components of the hidden economy during the transition. Our surveys focus on the everyday practice of tax evasion and tax avoidance (including some of the various methods and techniques enterprises use to diminish their tax liabilities). These methods include underreporting activities and revenues, exaggerating (over-reporting) costs, using outsourcing to small subcontractors in order to provide tax-efficient labour, tailor-made remuneration packages to take advantage of loopholes, etc. While some of the tax planning methods clearly remain within the realm of legality, others may include tax dodging of the illegal kind. The borderlines between avoidance and evasion are necessarily blurred. We also deal with some other aspects of fiscal discipline and tax compliance and enterprise behaviour (tax delays, tax litigation, etc .). Our data unanimously support the hypothesis that the importance of unofficial economic activity of registered medium and large enterprises radically diminished since 1996. As we also have information about the selected enterprise group s opinion on the unofficial activities of their business partners and main domestic competitors, our data enable us to generalise this finding to the whole registered business sector.