This is the seventh year that we’ve been taking stock of the types of taxes in Hungary – and the multi-year trend is decidedly reassuring. The number of taxes has decreased to some extent almost every year. This year we’ve counted 51 types of tax, and at this point one might reasonably ask: is it realistic to expect even fewer taxes?
When we first took stock of taxes back in 2016, we counted a surprisingly large number for the size of the country: 60.
By contrast, it’s particularly refreshing that this year we’ve only been able to count 51, even though the “net” fall over the years belies the fact that several new taxes have been introduced over that period.
And then there were fewer
Compared to last year, one tax at least has gone – the vocational training contribution, which we ourselves had previously listed among the taxes we thought should be scrapped. In fact, the legislators have exceeded our hopes, as not only has this tax been merged into the social contribution tax, but this has also meant an actual reduction in the burden.
Of course, the number of taxes is only one of many administrative burdens and there is no clear correlation between the number of taxes and the difficulty of administration. In other words: even a lot of taxes can be simple for the taxpayer to deal with, and even just a few types of tax can be complicated enough to give business owners and individuals a serious headache. There’s no doubt, however, that all other things being equal in a particular tax environment, doing away with a tax certainly brings a degree of administrative relief for businesses.
Could there be even fewer?
As usual, we’ve also looked at revenues from each type of tax. The less revenue a tax generates, the less justification there is for keeping it. This is particularly true if the tax revenue is less than the (presumed) cost of maintaining the tax concerned.
For many years, a good example of this – and a bit of an obsession of ours – has been the registration fee on domestic work. Although its administration is very simple, so few people pay it that the revenue from it was a paltry HUF 19 million (!) in 2021.
Another tax that’s ripe for scrapping is the special immigration tax. Not only because, according to the last available data, it does not generate any revenue, but now also because its rules are vague enough to allow organisations currently helping refugees from the Russian-Ukrainian war, or those supporting such organisations, to be subject to it. So, there could be a lot of people and entities who become subject to the tax without being aware of it.
Tax revenue trends
Another reason browsing the tax revenue list can be interesting is that it can give a decent insight into certain economic trends. There were again no significant shifts at the top of the revenue list last year. VAT, social contribution tax and personal income tax continue to generate the most revenue. It should be noted that VAT revenues increased by around 15% year on year, or twice the rate of growth of GDP for the year. This suggests further progress in the fight against the black/grey economy, i.e. a further increase in the effectiveness of VAT collection.
The Covid crisis is clearly reflected in the revenues from the tourism development contribution. While in 2019 around HUF 27 billion was derived from this tax, because of the emergency relief measures (and, indirectly, due to the crisis, which hit the hospitality industry especially hard) only around HUF 10 billion was collected in 2020, and a mere HUF 370 million last year.
Finally, interesting trends can be observed in registration tax revenues. While in 2018 and 2019 this type of tax generated HUF 25 billion in each of those years, in 2020 the revenues fell to HUF 19.5 billion and last year to HUF 17 billion. This echoes the news that new car sales have fallen sharply in the last two years.