تاثیر مالی بازنگری خصوصی سازی: نقش درآمدهای مالیاتی در اقتصادهای در حال گذار

In contrast to earlier literature, this paper finds empirical evidence that privatization has deteriorated fiscal balances in transition economies. The investigation focuses on the role of tax revenues in explaining the fiscal impact of privatization, as it appears that tax revenue in many transition countries remained lackluster even after the adoption of several tax reforms in the last two decades, and no formal econometric assessment has been conducted of the extent to which privatization has affected tax revenues. Using panel data for 29 Eastern European and former Soviet Union countries, the analysis finds robust signs of a strong negative impact of privatization on different tax revenue sources. The paper also provides some empirical evidence favoring the early adoption of value-added taxes that appear to have contributed to government revenue recovery.

There is little doubt that privatization of state-owned enterprises generates major effects on the government's fiscal position1 (Davis et al., 2000 and Barnett, 2000). A significant concern for many countries as they contemplate further privatization is its potential impact on the budget balance and, thereby, on the overall macroeconomic stability. The standard prescription for doing so has been that privatization of state-owned enterprises would imply less transfers to these enterprises and thus less expenditure responsibilities. However, not much attention has been given to the revenue side, in particular tax revenue collection, which may deteriorate considerably following privatization, as tax bases may shrink and special tax treatments for some economic sectors are usually provided, contributing to a worsening of the budget outcomes. This paper aims at empirically analyzing the impact of privatization on the budget balance of transition countries in Eastern Europe and the Former Soviet Union, with particular focus on the tax revenue side. Despite subsequent reforms to their tax systems in the last two decades, including among others the adoption of value-added taxes, tax revenue collection has remained lackluster in many transition countries following the significant drop in tax revenue in the first years after transition early in the 1990s. The most prominent exception is, perhaps, the experience of some Eastern European countries that implemented successful tax reforms very early in the transition process and were able to modernize – to some extent – their revenue administrations, to a great extent motivated by the run-up to enter the European Union. Tax revenue was particularly affected in transition economies in the early stages of implementation of liberalization, privatization, and stabilization reforms (Ebrill and Havrylyshyn, 1999 and Martinez-Vazquez and McNab, 2000). Before the transition, the main sources of tax revenue came from taxes levied almost only on state-owned enterprises; the tax on profits and the turnover tax being by large the most important revenue sources. The tax on profits was collected mostly on the basis of negotiations between large enterprises and government officials, effectively a business withholding tax (Buiter, 1997), with tax rates adjusted frequently, and the tax burden usually being different depending on the industry. Turnover taxes were levied mainly on goods, collected at wholesale or retail level, and often used as a mechanism to regulate prices and support allocation of resources set in the plan. The tax base was usually the difference between the retail price (fixed by the government) and the production cost. As a result of the structure of the tax system in the pre-transition period, privatization resulted in a significant decline in tax revenue collections that can be attributed to three major reasons: (i) decline in the traditional tax bases, (ii) deterioration in the capacity of the tax administration, and (iii) widespread adoption of tax exemptions and other tax incentives to attract investments. Privatization caused a significant negative impact on previously reliable tax bases, as a result of a decline in production, in state enterprise profitability, and in real wages. The capacity of the tax administration was severely weakened for different reasons (Tanzi and Tsibouris, 2000). Privatization eliminated most of the information on quantities produced and prices at which the output was sold, the number of taxpayers increased dramatically, and previous restrictions on the methods of payments among taxpayers, by which tax payments were transferred to the government, were removed. It is clear that the unsophisticated nature of the pre-transition tax administration, dealing with a few large state-owned enterprises, was not prepared to face this completely new environment and, therefore, prospects for tax evasion rose. Privatization may also have had an impact on tax revenues to the extent that governments aiming at attracting investors have provided a number of incentives, including tax rate reductions, tax holidays, establishment of special economic zones, and other tax exemptions (Cass, 2007). Clearly, the impact on different tax sources may have differed too, as their tax bases narrowed to different extents. For instance, taxes on international trade were not a major source of revenue, and some countries even extended protection of national industries through the adoption of higher tariffs after transition. The impact of privatization on tax revenue collection in transition economies remains a highly relevant issue. While some economies have already gone far in the privatization process with accumulated privatization proceeds above 30 percent of GDP (EBRD), for some others, particularly in the group of Former Soviet Union countries, privatization is still in a relatively early stage. Most importantly, the majority of the transition countries still face challenges in the adoption of sound tax policy reforms and in strengthening revenue administrations, to a great extent associated to the pre-transition structure of the tax system. Surprisingly, the question of how privatization has affected budget balances in transition economies and the extent to which tax revenue has contributed to that (and which taxes most) has received little empirical attention. Also, no empirical attention has been given to the type of tax reforms or institutional aspects that may have contributed to the recovery in tax revenue in the aftermath of the privatization reforms. Davis et al. (2000) find some empirical support for privatization improving budget balances and revenues. In contrast, substantial descriptive literature (see, as central examples, Martinez-Vazquez and McNab, 2000 and Tanzi and Tsibouris, 2000) of the tax systems of transition countries have recognized the negative impact of privatization on tax revenues through the different channels described above. There appears, however, to be no formal econometric assessment of this important issue.2 One of the reasons that empirical work in this area has remained so limited is related to the lack of reliable data on tax revenues in transition economies, the length of the data series, which are usually too short to produce reliable results in the early stages of transition, as well as the lack of good indicators for privatization. To overcome this obstacle, this paper uses what is believed to be a reasonably reliable and broad (unbalanced) panel dataset covering 29 transition economies over the period 1991–2010, and a series of indicators reflecting the extent of reform. The essence of the empirical strategy is to examine how budget balances and tax revenues are affected by privatization, conditioning on other variables that may explain them. In contrast to earlier literature, this paper finds that privatization is associated with a deterioration of the budget balances. In addition, this investigation finds robust signs of a strong deterioration in tax revenue associated with the privatization process, including for different tax sources (particularly for tax on profits and turnover taxes). The paper also empirically assesses the interaction of privatization with the adoption of value-added taxes, usually associated with an increase in the level of revenue mobilization, and other institutional arrangements, such as the run-up to enter the European Union, which may have influenced the speed of the tax reform and ultimately positively impacted revenue performance. While these appear to have contributed to some extent to tax revenue recovery, a still significant negative impact of privatization on tax revenue is found. The plan of the paper is as follows. Section 2 sets out the empirical approach and the estimation strategy adopted. Section 3 describes the dataset in more detail. The main empirical results are provided in Section 4, with further analysis for the purpose of additional robustness performed in Section 5. Section 6 summarizes the results and evaluates their importance in the context of further privatization reforms.

This paper has empirically analyzed the fiscal impact of privatization, with special focus on the extent to which the privatization process has affected tax revenue collection, and empirically assessed the magnitude of the impact on different tax revenue sources. Based on a panel of 29 transition economies during the period 1991–2010, the paper finds significant evidence confirming a deterioration of general government's budget balances associated with privatization and, in particular, the underlying hypothesis of a negative relationship between privatization and tax revenue, which is once again confirmed for the main taxes. This result appears to be robust to different estimators, the choice of alternative privatization indicators, and alternative model specifications taking into account the adoption of specific tax policy measures or institutional aspects that may have contributed to accelerating the path of tax system reform, thereby facilitating recovery of the lost revenue. Robustness to cyclically-adjusted budget balances and tax revenues has also confirmed the underlying hypothesis. The question then is whether further privatization is a cause for policy concern, as the privatization of state-owned enterprises is usually considered as an option for improving the government's fiscal position. The results here indicate that in fact the budgetary effects of privatization over time can be negative from the revenue side if tax reform is not adopted in a timely manner and the revenue administration is not consistently improved to catch up with the new challenges associated with a market-oriented economy. The use of tax policy to attract investors during and after the privatization process is also of particular importance. The widespread use of tax exemptions and preferential tax treatments has narrowed tax bases significantly. The results here do not point to any simple solution to the revenue challenges faced in replacing the loss from traditional pre-transition tax bases. Some broad evidence is provided, however, that the revenue loss may be mitigated by the timely adoption of structural tax reforms, as seems to be the case with the early adoption of value-added taxes in Eastern European countries in the run-up to enter the EU. An additional possibility is for countries to strengthen profit taxes, for example by streamlining the concession of tax incentives. While country experience has been quite diverse with the use of different strategies, it is clear that less attention has been given to the improvement of tax revenue administrations, as evidenced by the many remaining challenges faced by countries that are very advanced in the process of transition. This may prove detrimental to tax collection, since international experience (Tanzi and Tsibouris, 2000) suggests that many of the tax policy reforms have been hampered by difficulties in tax administration.