Inflation is a natural element of economic life: what cost 100 units last year may already cost 105 this year. We examined whether inflation has a similar effect on tax rates as well. The results are remarkably diverse. There are taxes that steadily and consistently follow inflation. At the same time, the legal system still contains several “relic” that have remained unchanged for 10, 20 or even 30 years and appear unaffected by the passage of time.
Inflation has always been part of our everyday lives, albeit to varying degrees each year. According to data published by the Hungarian Central Statistical Office, the annual average increase in the consumer price index was 14.5% in 2022, 17.5% in 2023, 3.7% in 2024, and 4.4% in 2025. But according to what principles and logic did individual tax rates increase during this period?
Where inflation hits automatically
In certain cases, inflation not only raises consumer prices but also directly increases state and municipal tax revenues.
The most obvious example is VAT: since the tax base is directly linked to the price of the product or service, any price increase automatically results in higher tax revenue. In this sense, VAT is the tax most sensitive to inflation. A similar mechanism can be observed in the case of local business tax, as the tax base is the adjusted revenue of businesses, meaning that inflation-driven prices directly increase the tax base and, consequently, tax revenues as well. Finally, as property prices rise, property transfer duties payable by purchasers also increase automatically.
Built-in inflation tracking
In 2024, the legislator directly incorporated inflation tracking into the regulation of several taxes, mainly itemized taxes. This so-called valorisation system means that the amount of tax must be determined based on the base amount specified by law and the inflation data for July of the year preceding the relevant tax year and then increased again in the following year based on the new inflation data, and so on.
Today, valorisation has already been introduced for several taxes, including registration tax, motor vehicle tax, company car tax, property transfer duty payable upon the purchase of motor vehicles, as well as building tax and land tax.
The advantage of the system is that no separate legislative amendment is required every year for tax rates to follow economic changes. At the same time, from the perspective of legal certainty, it may raise concerns that taxpayers often have to calculate the current amount themselves, as the actual amount payable is not expressly determined by law. This increases the risk of miscalculation and incorrect tax returns. The Hungarian Tax Authority (NAV) seeks to reduce this uncertainty by publishing the currently applicable valorised tax rates annually on its website for certain taxes.
Tax rates and tax thresholds increased from time to time
There are also numerous taxes where the legislator has gradually increased the tax rate, tax base, or the scope of taxpayers subject to the tax over recent years, always through individual legislative amendments.
For example, excise duty rates have been increased several times since 2022. This particularly affected energy products, alcoholic beverages and tobacco products. While in 2021 excise duty on petrol with an octane rating of 95 amounted to HUF 120 per litre, by 2024 it had increased to at least HUF 152. In the case of cigarettes, the tax burden amounted to approximately HUF 280–300 per pack in 2022, whereas by 2024 it had risen to around HUF 400–500. Moreover, excise duty increases also have a multiplier effect, since if the excise duty on a product increases, the VAT payable on the product also rises, because excise duty forms part of the VAT base. Consequently, a single tax increase raises state revenues through two separate channels. Furthermore, the above-mentioned valorisation system has recently also been introduced for excise duties.
The public health product tax may also be included here, as its rates increased significantly both in 2022 and in 2023. As a result of these tax increases, the consumer price of an energy drink increased by as much as HUF 50–150 compared to previous prices, a bag of chips by HUF 30–100, and a 2-litre soft drink by HUF 50–120.
Moving slightly beyond the world of direct tax burdens, a similar trend can be observed in the annual threshold for eligibility for VAT exemption for small businesses, which was HUF 12 million per year until the end of 2024, increased to HUF 18 million from 2025, and to HUF 20 million from 2026. The annual revenue threshold for eligibility for the highly favourable KATA regime with a monthly tax of HUF 50,000 also increased in 2022 from HUF 12 million to HUF 18 million. In addition, from 2026 the eligibility thresholds for opting into KIVA (small business tax) also increased significantly. Finally, the revenue threshold applicable to flat-rate taxation available to sole proprietors has also increased year by year, as it is linked to the minimum wage and therefore rises in parallel with increases in the minimum wage.
The “relics” unaffected by inflation
At the same time, the Hungarian legal system still contains numerous amounts and thresholds that have remained unchanged for more than a decade, despite inflation having significantly reduced their real value.
For example, under the duty exemption rules applicable to the purchase of new residential property, full exemption is still available only if the market value of the purchased property does not exceed HUF 15 million (between HUF 15 million and HUF 30 million, duty is payable only on the amount exceeding HUF 15 million). These thresholds have not changed significantly for more than 20 years, therefore their review would certainly be justified: while 20 years ago it was indeed possible to buy a home for HUF 15 million, today in Budapest even a single room cannot be purchased for that amount. In addition, the HUF 300,000 threshold applicable to the exemption of movable inherited property (e.g. furniture, household appliances, TV sets, laptops) has remained unchanged since 1990, i.e. since the introduction of the Duties Act.
A similarly outdated rule can also be observed in the personal income tax system. Under the law, no tax is payable if the annual revenue derived from the transfer of movable property (e.g. used TVs, refrigerators, sofas, children’s outgrown clothes, etc.) does not exceed HUF 600,000. This threshold has remained unchanged since 2012, meaning that the real value of movable property transferable free of tax has decreased drastically.
Although not directly related to taxation, the system of criminal value thresholds set out in the Criminal Code has not changed significantly since July 2013 either. While at the time when the Criminal Code entered into force a “first-generation” iPhone could be purchased on the Hungarian market for as little as HUF 40,000–50,000, the price of the latest iPhone models ranges between HUF 250,000 and HUF 400,000. In other words, the theft of such a phone would previously have qualified merely as a misdemeanour, whereas today, under the Criminal Code, it constitutes a criminal offence punishable even by executable imprisonment.
Conclusion
Inflation not only increases our everyday expenses but also reshapes tax burdens. Since different taxes follow inflation in fundamentally different ways, the tax system is becoming increasingly distorted: certain amounts increase almost unnoticed, while the real value of others gradually erodes. Addressing this issue may become another task for the new financial administration to resolve.