Issues – 2020, v7, s2, 1


The Journal of Corporate Governance,  Insurance, and Risk Management 2020, Volume 7, Series 2 

Characteristics of the Hidden Economy in Hungary before and after the Regime Change** 

Article Type: Research paper

Éva Fenyvesi, Tibor Pintér
Budapest Business School, Faculty of Commerce, Catering and Tourism

Lately, economists and policymakers have been paying even closer attention to the hidden economy. Indeed, it makes a difference to the economy how much money goes into the state coffers. To uncover the hidden economy, however, it is necessary to be familiar with its nature and manifestations. In this paper, with the aid of previous research and literature, we attempt to illustrate the characteristics of the hidden economy in Hungary before and after the regime change and to map out the steps that have been taken to uncover it. This publication was preceded by a systematic literature review on the definition, causes, and effects of the hidden economy, consisting of the collection of both data and literature related to the domestic hidden economy.  The following summarizes the results from the synthesis of literature: The Hungarian hidden economy existed even before the regime change and took a variety of different forms. These include tips, bribes, informal payments, unauthorized work and patchwork, moonlighting, unauthorized rental of real estate, use of the social property for personal gain, gains from the infringement of customs and exchange law, tax fraud by craftsmen and retailers, theft of public property, and corruption. Since 1990, not only have the dynamics of the hidden economy strengthened, but its types of activities have changed significantly as well. These include, but are not limited to: omitting a portion of revenue from the register; recognizing non-incurred material production costs among expenditures; including an excessive portion of personal household maintenance costs among production costs; organizing business and study trips abroad; finder’s fee; end-of-year depreciation or ‘transfer’ of inventories; wages of registered employees paid out of pocket; employment of unreported employees; parallel company formation; the economic activity of unincorporated individuals and the income generated thereby. The following are among the concrete steps taken in recent years to uncover the Hungarian hidden economy: the temporary employment booklet; the simplified entrepreneurial tax; the Electronic Trade and Transport Control System; online cash registers; the connection of vending machines to the tax office. 

Keywords: Economic policy, Hidden Economy, Tax, Hungary, Regime Change, Electronic Trade

*Corresponding author: Fenyvesi.Eva@uni-bge.hu

DOI: https://doi.org/10.51410/jcgirm.7.2.1  

Article history:

Received  07 01 2020
Revised   11 02 2020
Accepted 22 03 2020

**This article was presented at the 8th International OFEL Conference on Governance, Management and Entrepreneurship. From Corporations to Social Entrepreneurs:
Exploring the Different Faces of Social Innovation (April 17th – 18th, 2020, Dubrovnik, Croatia, Governance Research and Development Centre CIRU), Zagreb, pp. 25-34

Cite Article (APA)

Fenyvesi, É. and Pintér, T. 2020. Characteristics of the hidden economy in Hungary before and after the regime change. The Journal of Corporate Governance, Insurance, and Risk Management (JCGIRM). 2020, Volume 7, Series 2. pp1-13

 
 

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