Hungarian Business Register Coverage of the Hungarian Business Register Zsolt Völfinger 18th Roundtable on Business Survey Frames Session 5

Registration of business units The business registration is based on the tax number. The business units (legal units) are identified with tax number. Since 1997 the Business Register of the Statistical Office is linked with the administrative bodies of the business registration system.

Registration of business units Administrative bodies of the business registration system: Tax Office Registry Courts Ministry of Interior Ministry of Finance The common identifier is the first 8 digit of the tax number.

Registration of business units The administrative sources do not include any thresholds. The authorities of the business registration system transfer the data to the statistical business register. The BR includes data for all registered units without thresholds.

Registered units of the BR The registration without threshold indicates a large number of registered units. At the end of 2003 the BR covered 1 million 264 thousand legal units. Of which: companies: 210 thousand, partnerships: 250 thousand, sole proprietors: 717 thousand, non-profit units: 71 thousand, government units: 16 thousand.

Number of registered units Reasons for the high number of registered units: Relatively simple and inexpensive way of registration. High number of sole proprietors with tax number. Pseudo-entrepreneurs and part-time activities of entrepreneurs. Policy of registration authorities.

Definition of activity The administrative bodies are interested in to reach all economic operators. The BR is based on administrative sources, therefore numerous dormant units are included. It is a need to create an attribute to every legal unit to decide it is active or not.

Definition of activity Units are considered as active: - which were established in the reference year or in the previous year, - or were data supplier in the reference year or in the previous year, or had tax reports (corporate tax, VAT, etc.) with any turnover or investment or labour cost. Enterprises which fulfill one of these conditions are marked as active.

Active units in the BR BR - Dec 2003 Registered units Active units % Companies 209 641 185 606 86% Partnerships 250 564 223 659 89% Sole Proprietors 716 729 473 238 66% with license 488 198 420 605 with tax number 228 531 52 633 23% Enterprises total 1 176 934 882 503 75%

Active units in the BR At the end of 2003 75 per cent of the enterprises of the BR were considered as active, 25 per cent were dormant. The ratio of active units in case of relevant legal forms is 86-89 per cent. The 883 thousand active enterprises form the survey frame for 2004.

Active units in the BR The definition of the activity has no thresholds; therefore even the group of active units of the register could include not really relevant units. The definition could overestimate the number of the survey frame units.

Business Demography investigations Business Demography investigations apply a more strict methodology for the definition of activity. Business Demography data for 2002 indicates that 86 per cent of the active units of the register had reported turnover or employment for the reference year.

Business Demography investigations BD/BR - 2002 Active (BR) Active (BD) % Companies 171 584 141 995 83% Partnerships 213 760 160 967 75% Sole Proprietors with license 424 571 391 391 92% Enterprises total 809 915 694 353 86%

Business Demography investigations For the year 2002 86 per cent of the survey frame enterprises were confirmed as active using business demography data. This means that according statistical surveys and tax data for the year 2002 14 per cent of the active enterprises of the business register survey frame had not carried out economic activity.

Relevance of units It is difficult to decide a unit is relevant or not for statistical purposes. But! 9 per cent of the active units according to business demography did not reach the 1000 € turnover in 2002. As slight as 1000 € turnover probably cover secondary or part-time jobs or activities of pensioners.

Undercoverage of the BR Some units are out of scope of the BR. Wrongly coded units which are marked as ceased and are not part of the registered units. Active units marked as dormant. Business demography data show that close to 2 per cent of the dormant enterprises in the business register carried out economic activity in 2002.

Summary - The administrative system of the Hungarian business registration covers all units with tax number. - The administrative bodies have no particular interest in cessation of non active dormant units. - The business register of the HSCO covers all registered legal units and this indicates overcoverage in the registration. - The business register requires an attribute for activity, 25 per cent of the registered units are considered as non-active. Moreover in Hungary even the definition of activity overestimates the range of relevant units.

Summary - Business demography investigations show overcoverage as well. - Even one part of the active units with turnover or employment seems to be non-relevant; these units cover part-time jobs and are “pseudo enterprise” relations. - The number of active units of the register is not comparable with data from other business registers with thresholds.