Our traditional survey again looks at how many types of taxes there are in Hungary. The number of Hungarian taxes has fallen by one again this year, so we’ve counted 58 this time. The decrease, however, is of a technical nature only, while at the same time we continue to live with taxes such as the seemingly ineradicable charge payable on household employees or the newly introduced poster tax.
The re-regulation of the excise tax has resulted in the formal scrapping of the energy tax, so this year we again have one less tax in Hungary – with the current total standing at 58. In other words, the number of Hungarian taxes has just fallen for second year in a row.
On the other hand, there are now several different types of taxes that can be identified in numerous laws, the excise tax being a case in point. An excellent example is the amendment to the Act on Local Taxes effective from 1 January this year, which introduced the so-called “poster tax” within the context of the building tax. This specifies the advertising medium as a new tax object, and allows municipalities to impose on it a maximum tax of HUF 12,000 per square metre. However, as neither the object (property) nor the basis of taxation (area) differ significantly from those of the building tax, the poster tax cannot be considered a separate type of tax.
How much of what?
VAT: increasing efficiency
There are no surprises at the top of the revenue list: the budget derived more than HUF 3,500 billion in revenue from VAT in 2017. This tax generated a 7% revenue growth year on year, despite the fact that the list of reduced-rate products and services is expanding continuously. Although this phenomenon may in part result from growing consumption and gradually rising inflation, efficient tax collection is at least as important. Furthermore, the introduction of online invoicing during the year could give another boost to VAT revenue growth.
Corporate tax: small but strong
The corporate tax rate was cut from the previous 10/19% brackets to a mere 9% in 2017. At the same time, the revenue derived from it (approx. HUF 625 billion) dropped relatively little, by just 8.5% year on year, and is far above the 2015 revenue figures. So at first sight less can actually be more. Nevertheless, the 40% lower revenue target for 2018 (approx. HUF 363 billion) indicates that the figures are heavily distorted by temporary items, probably resulting from the growth tax credit.
EVA, KATA, KIVA: reshuffle in progress
If we look at the so-called small taxes, it is noticeable that the government derived more revenue from KATA [the flat-rate tax for small taxpayer enterprises] (approx. HUF 98 billion) than from EVA [the simplified entrepreneurial tax] (approx. HUF 64 billion) for the first time last year, while the revenue derived from KIVA [the small business tax] (approx. HUF 22 billion) increased by 65% year on year. It seems that the tax administration’s intensive marketing campaign is starting to bear fruit, and taxpayers are beginning to understand and like the new, simplified types of tax. Nevertheless, EVA, which was introduced in 2003, continues to generate far more revenue than KIVA, despite the fact that it can no longer help taxpayers achieve any real tax savings as compared to the regular corporation tax.
Invisible micro taxes
To evaluate the tax system, it is still worth paying particular attention to the fate of small taxes or those that bring in inexplicably little revenue. There’s no change in this category as, based on 2017 preliminary data the charge payable on household employees claimed the negative record again, generating HUF 29 million in revenue over the year.
Where do we go from here?
The future may hold some excitement as far as types of tax are concerned. Some parties preparing for the elections have proclaimed their intentions to reduce the number of taxes, while their programmes include ideas for at least 9 new tax types. So we cannot rule out the possibility that next year we will face new types of tax such as the “speculation tax”, the “greenhouse gas tax” or the “unoccupied property charge”.