Econometric Modelling of the Fiscal Pressure on the Equilibrium of a Sample of Entities

The financial equilibrium of the enterprise is an important company function ensuring by itself the maintenance of the enterprise of the competitive market. The financial equilibrium is analysed in numerous empirical studies. In this empirical study we highlight for the first time in a research the impact that taxation has on the financial equilibrium of some companies over ten years, period that includes the pre-crisis, the financial crisis and postcrisis periods.


Introduction
Taxes and fees have a dual quality in terms of financial equilibrium of companies or taxpayers.In this case, taxes and fees, on the one hand, represent an expense for businesses or taxpayers, and on the other hand, represent a duty or an obligation for them.
The development of the enterprise is unquestionably related to ensuring the economic equilibrium expressed in value.The financial equilibrium expresses equality and correlations between the necessary financial resources and the possibilities of collecting these resources.
The financial equilibrium of the company requires covering all operating expenses from its own income or loan, all expenses that are not covered in costs, the costs of development and modernization of the enterprise, the expenses to stimulate staff and shareholders and the contractual obligations and the financial commitments to banks and the state budget.
The forms of financial equilibrium are expressed through the states of liquidity and solvency.
While liquidity is a state of financial equilibrium expressing an entity's ability to pay on short term, by synchronizing during the financial year the cash inflows and outflows, solvency is the long-term ability of the enterprise.
The status of liquidity is specific to the entity's operating cycle, that is, the time between the purchase of raw materials and the transformation of finished goods in cash or into an instrument readily convertible to cash.The solvency status is specific to the financial cycle comprising three overlapping cycles: the operational cycle, the investment cycle and the financing cycle.
Various works present either empirical research on taxation or on the enterprise's equilibrium, but so far there are no researches on the impact of taxation on the financial equilibrium of the company.

Literature Review
The financial crisis affected the performance and the fiscal pressure of each company which is mention in several works of art in analyzing both the banking crisis and the sovereign debt crisis.Public debt was considered one of the main reasons of concern for many countries.This problem became acute in the early 80s, when the early signs of the crisis occurred in several countries.This was manifested by the cessation of foreign debt payments.Such problems caused by public debt have come to the attention of both creditor states and those responsible for payment.In the early 1980s foreign debt crisis was manifested in several countries particularly indebted countries in Central and South America [1].
In recently published papers, there are analysed the correlations between the financial equilibrium and a series of independent factors that can ensure that state of enterprises.Thus, in a recent paper Kuo et al. stress that in order to ensure the strategic equilibrium of companies, carbon emissions should be reduced by increasing the fees for the growth of these emissions.To achieve this goal, a series of countries have implemented tax policies to reduce carbon emissions by setting higher prices of carbon emissions, thus forcing polluting The research results showed that the optimal rate of taxation on a manufacturing company in China is 21.82% [4].In another paper it is analysed the competition among supplier enterprises (cooperatives) and investor-owned firms (IOF) when acquiring different quality commodities from agricultural farmers [5].Referring to the post-communist period, Lattore (2012) shows that entry of multinationals (MNE) in transition economies brings a process of restructuring of various industries.This process is illustrated by data on the rapid entry of multinational companies in the automotive sector in the Czech Republic, which took place before the financial crisis [6].On the other hand, referring to the company's strategies, Granadier (2002) studies how the equilibrium investment strategies can be applied on a continuous basis, following the Cournot -Nash model [7].Financial equilibrium depends by the cash flow which can be found in numerous papers.Thus, Găban (2016) shows that "in the financial reporting system, the balance sheet and profit and loss account are key elements throughout the world as part of periodical financial reporting while the cash flow statement is not mandatory in many countries (e.g.Germany and the Netherlands).In Japan, cash flow reporting is mandatory only for companies listed at the stock exchange market."[8] Analysing the behaviour of multinational companies, Latorre (2013) constructs a general equilibrium model to analyze the performance of companies.The model is applied to the Czech Republic where direct investment have been very attractive in the past three decades [9].In another paper, Osborne et.al.(1986)focus on the study of symmetry of mixed strategy equilibrium for an arbitrary distribution of the number of consumers and firms [10].Analysing the equilibrium at macroeconomic level, Coffinet and Pop (2013) show that the current financial crisis offers a unique opportunity to investigate the most important features of market indicators in a particular environment and their usefulness form a banking supervisory perspective.In general, both accounting information and stock exchange quotations contain useful information for achieving better forecasts in a highly stressed financial world [11].
Other authors present the method of quantitative assessment of brand equity.Using techniques of financial analysis focusing on return on equity and return on assets, the results of two strategies to increase equity are being analysed for distinct brands: increase in procurements and development of their own brand [12].The equilibrium analysis based on financial ratios is presented in the paper showing that the analysis based on ratios in small and medium enterprises (SMEs) is very important.The paper analyzes the trends and dynamics of some of the most important financial ratios of the position and business ratio of the financial performance of SMEs in the Republic of Croatia [13].The analysis of the equilibrium through the financial structure is presented by Townsed (2010) showing the need for an approach of the general equilibrium for assessing financial systems such as: the microeconomic sector and the macroeconomic sector, in order to reduce poverty and increase welfare [14].

Research Methodology and Results
In The functional form of this model is as follows: where y -dependent variable α -constant X ′ -independent variables β -regression coefficient ε -errors (independently and identically distributed) In order to avoid overloading the results with text, we shall introduce notations for both dependent and independent variables, notations that will be used throughout the research.
Fiscal pressure at the level of economic agents is determined using a system of indicators considered independent variables in our research and whose development we present below.

Fiscal Pressure toTurnover -RPFca
The indicator is calculated as a ratio of total social contributions and taxes and turnover.

Fiscal Pressure to Value Added -RPFva
The indicator is calculated as a proportion between the total social contributions and taxes and the value added.
The indicator highlights the size of the own resources allocated to settle tax and social obligations of the economic agent.It results that about 25% of added value are directed to the state budget, the remaining 75% being available to businesses to pay for the factors of production, namely labour and capital.

Fiscal Pressure to Equity -RPFcpr
The indicator is calculated as a ratio of total taxes and fees and social contributions and equity.
The indicator highlights the company's equity capacity to cope with tax and social obligations incumbent upon a fixed period of time.

Fiscal Pressure to Expenses-RPFcht
The indicator is calculated as a ratio of total taxes and social contributions and the total expenses of the company.Source: Own calculus In the total current expenditure the share of taxes and social contributions is at a normal level in economic terms, i.e. about 10%.
Current liquidity (RLC)reflects the capacity of current assets available (stocks, unearned invoices, short-term investments, expenses in advance) to turn into cash on hand, meant to cover the outstanding debt of the economic entity.
It is estimated that the entity has a favourable liquidity if the current liquidity ratio is between 200% and 250%.
From the chart below we can see that throughout the period under review the panel of companies had a liquidity which allowed it to meet due payments.Creditors are interested in a value as high as possible of the ratio, their guarantee being made up of the asset of the economic entity.The optimal level of the indicator is between 80% and 180%, according to bank estimates.Debt equity ratio (RIT) expresses the company's ability to cope with external payments and is calculated as a percentage ratio between debt and equity of the company.The optimum value of the indicator is in the green area, that is, between 0% and 30%; between 31% and 50% we talk about the grey area; between 51% and 70% we stand in the red zone, and over 70% the company is in the red area.Source: Own calculus Indebtedness of enterprises is very high and therefore it must be analysed in correlation with liquidity and solvency.This analysis indicates that enterprises in the panel cope with payments in both the short and long term.
Repayment capacity CR) highlights the resources available to the company to repay the loans and is calculated as a ratio of the self-financing capacity and the amount of due instalments.A higher value of the indicator means a greater capacity of the company to repay by due dates the instalments owed to banks.The data in the chart highlights generally an adequate capacity to pay bank instalments from their own resources.In conclusion, taxes and fees influence the three basic components of the balance sheet, namely assets, liabilities and equity and the financial equilibrium expressed through its relevant indicators: liquidity, solvency, repayment capacity and investment capacity.

Preprints
(www.preprints.org)| NOT PEER-REVIEWED | Posted: 18 September 2017 doi:10.20944/preprints201709.0076.v1 the research we have conducted we shall model the relationships existing between fiscal pressure indicators (Fiscal pressure rate to value added, fiscal pressure to equity, Fiscal pressure rate to turnover, Fiscal pressure rate to share capital, Fiscal pressure rate to resource consumption) and indicators reflecting the equilibrium of an enterprise (current liquidity ratio, overall solvency ratio, total borrowing rate, repayment capacity -CR and rate of selffinancing of tangible assets -RAIC).These demarches are taken in order to ʺpassʺ from a mere descriptive analysis of the situation that a company faces at a certain moment in time, to an in-depth analysis based on econometric analyses of the relationships established between the indicators brought under discussion.The data based on which this research was carried out come from a sample of five companies, selected randomly, whose evolution is tracked over a time period of ten years(2002)(2003)(2004)(2005)(2006)(2007)(2008)(2009)(2010)(2011).Taking this into account, it is clear that we actually analysed a balanced panel.After a series of tests and subsequent removal of the various possible models at our disposal, we stopped on the general linear model derived from the Least Squares in Simple Form technique.This model was chosen to model the relationship between the variables because it fits quite well with available data, and it is also the only relevant model in terms of observance of considered creditworthy indicators (F statistics, adjusted R 2 ).

Figure 1 .
Figure 1.The evolution of Fiscal pressure to turnover of a sample of entities

Figure 2 .
Figure 2. The evolution of fiscal pressure to value added

Figure 3 .Fiscal
Figure 3.The evolution of Fiscal pressure to equity

Figure 4 .
Figure 4.The evolution of fiscal pressure to social capital

Figure 5 .
Figure 5.The evolution of fiscal pressure to expences

Figure 6 .
Figure 6.The evolution of current liquidity ratio

Figure 7 .
Figure 7.The evolution of solvency ratio

Figure 8 .
Figure 8.The evolution of debt to equity ratio

Figure 9 .
Figure 9.The evolution of repayment capacity ratio b) Modelling the relationship between RSG -dependent variable and RPFva, RPFcpr, RPFca, RPFcs, RPFcht -independent variables: From the table above it can be seen that although the overall model fits relatively well with corresponding data (F=3.29;p<0.00131; adjusted R 2 =0.2719) is quite good because the regression coefficients corresponding to the variablesRPFva, PPFcaandRPFchtare significantly different from zero.Thus, the model becomes RSG = 307.8602+ 4.281334 RPFva -14.43973RPFca + 35.73914*RPFcht + ε, c) Modelling the relationship between RIT -dependent variable and RPFva, RPFcpr, RPFca, RPFcs, RPFcht -independent variables: Unlike the first two sub-points, the model resulting from this set of processing is substantially better than the previous ones (F=44.96;p<0.0000; adjusted R 2 =0.8177), with total borrowing rate explained over 80% by the fiscal pressure indicators considered.However, it should be mentioned that not all the explanatory variables considered are relevant, as for the variables RPFcs and RPFcht the corresponding regression coefficients are not significantly different from zero.Thus, the final econometric equation for this relationship shall be: RIT = 3309.209-78.02433*RPFva + 9.760526*RPFcpr-75.41799*RPFca+ ε change the volume and structure of patrimonial assets and liabilities of the entity, respectively the volume and structure of results reflected in the balance sheet.
Other authors such as Wu et.al.built a general equilibrium model that takes into account the optimal short and long term privatization policies [3].Another general equilibrium model is presented by Ji et.al. in which is analysed the tax reform in Chinese enterprises in the context of application of the 25% flat income tax.
companies to invest in green technologies [2].

Tangible self-financing rate (RAIC)is determined
as the ratio between the self-financing capacity and the value of tangible assets.The indicator shows what percentage of own resources is allocated to investments.Financing of investments from own resources, although not recommended by specialists, in times of financial crisis, may constitute a development model to overcome the crisis.It is noted that throughout the crisis period, investments were made from own resources.