Government Subsidies to Enterprises in Central and Eastern Europe: Budgetary Subsidies and Tax Arrears
AbstractThis paper analyses the distribution and allocation of budgetary subsidies and tax arrears in Central and Eastern Europe. Budgetary subsidies are relatively small in aggregate, highly sector specific, and the manufacturing sector receives few of them. Tax arrears, by contrast, are a significant problem, and the paper argues they can be considered a form of government subsidy. Data for the various Visegrád countries suggest that the total stock of tax arrears is on the order of 5- 10% of GDP, the annual flow of tax arrears is around 2% of GDP, and the annual flow of tax arrears to the manufacturing sector is around 1% of GDP. Survey data from Hungary and Poland show that tax arrears are concentrated in a small number of low profitability firms; the main correlate of tax arrears is low profitability; and the flow of new tax arrears is the main financing that enables these very unprofitable firms to continue to operate.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1144.
Date of creation: Mar 1995
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Find related papers by JEL classification:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H29 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other
- H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
- P43 - Economic Systems - - Other Economic Systems - - - Finance; Public Finance
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