Transcript 1. dia

Taxing cultures
and
Tax Dilemmata
not only in
Transition Economies
Heidelberg 18.06.2015.
Dr Péter Darák
ELTE Budapest
Economic view of
non-observed economy
• „incomings which fall out are not social costs as a
whole, but more transfers within the society, and
cause only costs through their distortions”
/Collard 1989
• „Theoretically tax evasion could enhance welfare,
correcting the to high tax ratings to optimal
standards” /Davidson 2005
• „The economic crisis has given government the
impetus to take on Europe’s massive shadows
economy” /Schneider 2013
Specialities in Eastern Europe
• Long period of transformation to market
economy in the ‘70-s, ‘80-s. („Second
economy” – joint ventures in industry and
trade, individual home activity in agriculture
were more or less legal!)
• But: profit maximizing strategy
instead of a long-term orientated view
• Controversial connection to the „first
economy”
What is the „non-observed” economy? I.
Hidden, illegal, informal sector:
• unreported income arising from legal activities
(undeclared tips, not reported professional
services)
• income from illegal activities
(unlicensed production of tobacco, alcohol,
illegal production of drugs, prostitution)
What is the „non-observed” economy? II.
• Production of goods for own use
(private consumption of commercial production)
• A „statistical underground” reflecting
shortcomings in statistical techniques and
information sources (childcare at home,
private household services, other personal)
Extent of black economy
• Estimated: 5%-32% of the GDP in EU Member
States
• 15-32% in Eastern-Europe
• In some sectors exceeding 30% (e.g. construction)
• High in manufacturing (15%), whole-sale and
retail (20%), hotels and restaurants (19%),
agriculture (15%)
• No gray zone: financial sector
• 60-80% of the estimated tax gap is attributed to
small business and self-employed entrepreneurs
Factors influencing taxpayer behaviour
•
•
•
•
•
•
Deterrence
Norms
Opportunities
Fairness
Economic factors
Interactions
Deterrence
• Risk of detection and/or severity of
punishment
• Deterrence is more effective where strong
social norms exist
• Communication plays a critical role
Norms (Drivers), opportunities
• Personal willingness and social motivation
• Normative messages
• How high is the possible gain of the
transaction? (too high tax rates … 1% increase
in the tax charge results in an 8% increase in
concealed income)
• To limit chances
• Regular legislative amendments
Fairness of the revenue body,
economic factors
•
•
•
•
Distributive fairness
Procedural fairness
Fairness in punishment
Wide spectrum of conventional and not
acceptable behaviour in different economic
sectors
Interactions
• How do the various drivers of compliance
behaviour interact with each other?
• Controlling and supportive approaches
• Increase of tax burden (35-38%) and
tax moral (22-25%) can change the size of
black economy principally /Schneider 2012
New risks
•
•
•
•
•
Domestic and off-shore locations
The growth in e-commerce
Internet-related electronic payment systems
Mobile payment services
(e.g. tax moral of poker players)
Old-style risk management
• Comprehensive research
• Enhanced risk detection processes
• Set of risk treatment (different handling of
„risk takers”, „rule breakers” and organised
crime)
New approaches(?)
• Comprehensive industry benchmarking
• Industry-based witholding/third party reporting
regimes
• Korea’s lottery
• Increased surveillance of cash transactions
• Increased record-keeping audits in high-risk
industry sectors
• Collected suspicious transactions reports
• Educating new/potential taxpayers
Specialities in Eastern Europe
• „Invoice factory” (Invoice mill)
• „Oil blonding” cases (illicit import and trade
of oil products in the ‘90-s which ensured
a high additional profit for organised groups)
• Great number of workers on minimum wages
(they get additional cash in hand from employers)
• Corporations are willing to employ people who
have a trade license as self-employed
entrepreneurs to avoid social security
contribution
Typical forms of tax evasion in Hungary
• Cash-in-hand in employer-employee relation
• Unreported sales and services by
entrepreneurs
• Counterfeit contracts for more favourable
tax rates (capital income is taxed less than
employment income)
• Overclaiming of expenses
• Deduction of household expenses
(maintenance of car) as expenditure
New methods of government I.
• HU: Online cashier’s desk connected to the
revenue service, Transport registration
(EKÁER- system), tax amnesty for hidden
income
• SLO: photographed cash receipts
• F: suspicious transaction reporting,
presumption of income on the basis of
lifestyle
New methods of government II.
• Spain: monitoring the use of high-value euro
banknotes, reporting of electricity consumption
• Ireland: name and shame, „cold calls”, reduced
rates of whitholding for compliant taxpayers
• South-Korea: Lottery for cash receipts
(prize rewards up to 10,000 $)
• Japan: Blue Return System – tax returns for
accurate accounting books
New methods of government III.
• Sweden: code of conduct project for
construction sector
• Denmark: fair-play initiative
• Belgium, Bulgaria, Denmark, France, Greece,
Italy, Slovakia, Spain: restricted large cash
payments
Conclusions I.
• Tax evasion is a part of modern economy. (Not
always negative! Illicit work can help to survive
bad situations for unemployed people, can create
new jobs. Keeps alive businesses which would
have to go bankrupt because of high depts, tax
burdens)
• Look for reasons and causes
• Use regulating instruments, make impact analysis
• Reduce over-taxation
• Improve the tax moral
Conclusions II.
Make sure that severe punishment is inevitable
for illicit activity, but treat different:
- crimes as not economical activity (arms
dealing, drug trafficking)
- economic crimes (fictitious VAT reclaims,
failure to pay taxes)
- tax compliance deficits in the framework of
legal economic activities
The future of the hidden economy
• Connected to future of cash?
• All methods can be tried and used
• More influence to citizens: This control can be
very strong