Difference between revisions of "Stróman (Hungary)"

In Hungary the use of term ''stróman'' can be traced back to the pre-war years when the first (1938) and second (1939) ‘Jewish Law’ in Hungary significantly restricted the number of Jews in liberal professions, public administration, and in commercial and industrial businesses. As a result, about 90,000 Jewish people lost their jobs or businesses. Jewish owners were forced to pass their enterprises – from small shops to large corporations – to new Catholic owners, but many of them continued to control the company from behind the scenes<ref>Kadar, G. and Vagi, Z. 2004. Self-Financing Genocide: The Gold Train, the Becher Case and the Wealth of Hungarian Jews. New York: Central European University Press, p.63.</ref>. Hungarians started to use the word ''stróman'' to refer to these visible but fake Catholic business owners. In fact, the widespread ''stróman'' system helped many Jewish families to maintain some level of income during the hostile anti-Semitic political environment of the late 1930s.

In Hungary the use of term ''stróman'' can be traced back to the pre-war years when the first (1938) and second (1939) ‘Jewish Law’ in Hungary significantly restricted the number of Jews in liberal professions, public administration, and in commercial and industrial businesses. As a result, about 90,000 Jewish people lost their jobs or businesses. Jewish owners were forced to pass their enterprises – from small shops to large corporations – to new Catholic owners, but many of them continued to control the company from behind the scenes<ref>Kadar, G. and Vagi, Z. 2004. Self-Financing Genocide: The Gold Train, the Becher Case and the Wealth of Hungarian Jews. New York: Central European University Press, p.63.</ref>. Hungarians started to use the word ''stróman'' to refer to these visible but fake Catholic business owners. In fact, the widespread ''stróman'' system helped many Jewish families to maintain some level of income during the hostile anti-Semitic political environment of the late 1930s.

New forms of the use of ''stróman'' emerged in Hungary in the 1990s and have become a ‘normal’ phenomenon in the daily life of country’s post-socialist economy. Being a ‘paper’ owner of a company that provides fake receipts for fictitious services is the most typical role of a ''stróman'' in contemporary Hungary. Buying fake receipts from a ''stróman’s'' company is a response of entrepreneurs and many ordinary citizens to strong external constraints. For example, tax statistics indicate that more than one third of the Hungarian labour force earns only the minimum wage<ref>NAV. 2013. NAV Évkönyv: Tények, információk a Nemzeti Adó- és Vámhivatal szervezetéről és annak 2012. évi tevékenységéről. </ref>, yet in reality most of these employees are earning more, but declaring only a minimum wage. To avoid the tax burden on labour companies often force their employees to obtain fake receipts for bogus services in order to receive the part of their salary that exceeds the minimum wage.

New forms of the use of ''stróman'' emerged in Hungary in the 1990s and have become a ‘normal’ phenomenon in the daily life of country’s post-socialist economy. Being a ‘paper’ owner of a company that provides fake receipts for fictitious services is the most typical role of a ''stróman'' in contemporary Hungary. Buying fake receipts from a ''stróman’s'' company is a response of entrepreneurs and many ordinary citizens to strong external constraints. For example, tax statistics indicate that more than one third of the Hungarian labour force earns only the minimum wage<ref>NAV. 2013. NAV Évkönyv: Tények, információk a Nemzeti Adó- és Vámhivatal szervezetéről és annak 2012. évi tevékenységéről. </ref>, yet in reality most of these employees are earning more, but declaring only a minimum wage. To avoid the tax burden on labour companies often force their employees to obtain fake receipts for bogus services in order to receive the part of their salary that exceeds the minimum wage.

[[File:Photograph of two homeless people.jpeg |400px|thumb|left Description: Photograph taken in 2006 by Gergely Túry to document a stroman case in Hungary. The two homeless people depicted in this picture are László Kutrucz and László Baráth, who were CEOs of several fake companies; this fake companies were used to procure a significant amount of public funds and served as intermediaries for the Hungarian subsidiary of Siemens. The homeless CEOs' jobs was to withdraw money from the fake companies' bank accounts in order to give it back in cash to their shadow principals. This case was explored by an investigative journalist, Annett Sipos; it was later published in the Hungarian economic maganize HVG in 2006. Both Kutrucz and Baráth agreed to be photograph and they also gave permission to use their names. The article can be found: [http://hvg.hu/itthon/20061211_siemens.]Source: Gergely Túry and David Jancsics]]

[[File:Photograph of two homeless people.jpeg |400px|thumb|left Description: Photograph taken in 2006 by Gergely Túry to document a stroman case in Hungary. The two homeless people depicted in this picture are László Kutrucz and László Baráth, who were CEOs of several fake companies; this fake companies were used to procure a significant amount of public funds and served as intermediaries for the Hungarian subsidiary of Siemens. The homeless CEOs' jobs was to withdraw money from the fake companies' bank accounts in order to give it back in cash to their shadow principals. This case was explored by an investigative journalist, Annett Sipos; it was later published in the Hungarian economic maganize HVG in 2006. Both Kutrucz and Baráth agreed to be photograph and they also gave permission to use their names. The article can be found: [http://hvg.hu/itthon/20061211_siemens.]Source: Gergely Túry and David Jancsics]]

The value-added tax rate (VAT) in Hungary is 27 percent, the highest in the world. Hungarian companies routinely buy receipts from ''stróman'' companies in order to prove false costs for fictitious service and so reduce the VAT they need to pay. It is reported that ''stróman'' company schemes – chains of deliberately created and managed fake ‘receipt factories’ (''számlagyár'') – exist in Hungary, in which the final receipt giver often happens to be a foreign company in Ukraine or Serbia that cannot be investigated by the Hungarian tax authority<ref>Baka, F. Z. 2014. ‘Titkos zugok - A fordított áfa a NAV csődje?’ Figyelő.hu, 04 January, http://figyelo.hu/cikkek/titkos-zugok---a-forditott-afa-a-nav-csodje</ref>. Many receipt schemes operate relatively securely because their shadow owners have good connections to political parties, to government officers and to the tax authority. Thus they are able to ‘turn off’ external controls of anti-corruption units, judicial authorities or prosecutors<ref>Jancsics, D. and Jávor, I. 2012. ‘Corrupt Governmental Networks’, International Public Management Journal, 15: 62-99</ref>.

The value-added tax rate (VAT) in Hungary is 27 percent, the highest in the world. Hungarian companies routinely buy receipts from ''stróman'' companies in order to prove false costs for fictitious service and so reduce the VAT they need to pay. It is reported that ''stróman'' company schemes – chains of deliberately created and managed fake ‘receipt factories’ (''számlagyár'') – exist in Hungary, in which the final receipt giver often happens to be a foreign company in Ukraine or Serbia that cannot be investigated by the Hungarian tax authority<ref>Baka, F. Z. 2014. ‘Titkos zugok - A fordított áfa a NAV csődje?’ Figyelő.hu, 04 January, http://figyelo.hu/cikkek/titkos-zugok---a-forditott-afa-a-nav-csodje</ref>. Many receipt schemes operate relatively securely because their shadow owners have good connections to political parties, to government officers and to the tax authority. Thus they are able to ‘turn off’ external controls of anti-corruption units, judicial authorities or prosecutors<ref>Jancsics, D. and Jávor, I. 2012. ‘Corrupt Governmental Networks’, International Public Management Journal, 15: 62-99</ref>.

There are three functions that a ''stróman'', sometimes simultaneously, performs: (1) fall guy, (2) hidden identity, and (3) hidden ownership.

There are three functions that a ''stróman'', sometimes simultaneously, performs: (1) fall guy, (2) hidden identity, and (3) hidden ownership.

Although the ''stróman'' is usually in a subordinate position he still has some leverage with his boss. The fact that he knows a lot about the shadow principal’s illicit practices makes their relationship dynamic and complex. The actors become interdependent and capable of blackmailing each other and this provides bargaining chips in negotiations between them.

Although the ''stróman'' is usually in a subordinate position he still has some leverage with his boss. The fact that he knows a lot about the shadow principal’s illicit practices makes their relationship dynamic and complex. The actors become interdependent and capable of blackmailing each other and this provides bargaining chips in negotiations between them.

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