Mária Lakatos

Taxation in General: Hungarian Tax System

Changes between 1989-1994

The two years before the change of the regime (the Changes) and the following four years produced no major changes, only minor corrections in terms of taxation policy. By 1994, however, the state budget deficit - where state debts represented an especially high rate - could not longer be managed due to the complex effect of the earlier inconceivable rate of economic transformation, due to the reorganization of the total production chain and, of course, due to the transformation crisis caused by the loss of the traditional markets.

The picture is even more complex if we look at the transformation from the viewpoint of the trend in the number of potential tax-payers. Between 1989 and 1995, the restriction on the market entry by private businesses ceased to exist when the transformation act, the company act and the cooperative act were modified and adopted as well as companies and ventures could be founded and launched on a subjective right. However, an unprecedented wave of liquidation swept all over the whole economy. As a result of these two impacts the former employee data went down from 4.8 million to 3.7 million, while the number of entrepreneurial organizations increased from 400,000 to almost 1 million. This means that 25 % of the former wage-earners disappeared and were on the dole, while the number of enterprises increased by 2.5 times. It was evident already at that time that the number of entrepreneurs grew out of constraint. One facing unemployment, rather set up a sole-proprietorship to avoid it, but the question was whether they could satisfy any of their obligations.

The personal income tax act merely followed the changes, e.g. the tax bracket limits were increased to counterbalance the above-30 % inflation rate but this could not prevent the higher burden as a result of the inflation.

As can be seen, the characteristic features of the current situation has evolved eversince this period. Accordingly, in the surveyed period:

the Hungarian taxpayers did not pay significantly more than the taxpayers in Western Europe,
the various categories of incomes remained as set and thus the number of the separately taxed incomes started to grow and they paid less and less tax,
the taxpayers were the employees on the one side, who could not avoid taxes so they had a higher share of the burden, and to the private entrepreneurs on the other side, who adapted to the tax changes extremely flexibly. This latter group forms the biggest group and their behaviour basically determines the tax revenues.

Taxation in General: Hungarian Tax System

Tartalomjegyzék

Kiadó: Akadémiai Kiadó

Online megjelenés éve: 2022

ISBN: 978 963 664 137 5

Taxation is a scheme for the state to provide revenue. The so collected money could then cover the public spending of the government. These are the so-called allocative and redistributive functions of the state budget. Although, taxation theory discusses the various tax types and analyses the various taxation tools very extensively, there is no absolute answer to the question, when and what type of taxation system would be optimal. Thus this introductory book on taxation deals with the three basic types of taxes - the income tax, the VAT and the corporation tax - in a very pragmatic way. There are legal texts and cases from both the international and also from the relevant Hungarian practice.

This book is recommended not only for students of economics but also for law students and practitioners beside anyone who is interested in the basic regulations of taxation.

Hivatkozás: https://mersz.hu/lakatos-taxation-in-general-hungarian-tax-system//

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