Digitalization against the shadow economy: evidence on the role of company size

Bálint Ván (), Csaba Tóth, Gábor Lovics () and Katalin Szőke ()
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Bálint Ván: Ministry of Finance
Gábor Lovics: Hungarian Central Statistical Office
Katalin Szőke: Central Bank of Hungary

No 2224, CERS-IE WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies

Abstract: Online cash registers (OCRs) are important tools for reducing the size of the shadow economy. This paper analyzes the impact on reported turnover and tax liability of introducing OCRs in Hungary using a fixed-effects panel and event study model. We identify strong size-related heterogeneity in the retail and the accommodation and food services sectors: smaller companies increased their reported turnover more than larger ones. Since large companies pay the dominant part of value-added tax, the effects on the payment of this tax were mitigated. We find significant spillover effects in both sectors, which are slightly stronger among larger companies.

Keywords: Value-Added Tax; Tax Evasion; Shadow Economy (search for similar items in EconPapers)
JEL-codes: E26 H25 H26 (search for similar items in EconPapers)
Date: 2022-12
New Economics Papers: this item is included in nep-iue and nep-pbe
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