Economy & Policy

Hungary’s tax administration could be the simplest in the EU

Effective economic whitening has been behind the tax cuts, while COVID-19 highlights the importance of the significant decline of Hungary’s black economy since 2010.

Minister of Finance Mihány Varga talked about the Hungarian tax administration at a joint online conference of PricewaterhouseCoopers (PwC) Hungary and Pázmány Péter Catholic University.

Varga explained that the coronavirus epidemic is causing significantly more damage than the 2008 credit crisis, but unlike then, Hungary’s economy is now stable, allowing the country to protect the economy and preserve jobs, he said.

The government’s policy based on tax cuts has not changed for more than a decade, nor could the virus even overwrite it, the minister stressed, noting that the government has continued its tax-cutting policy even this year.

Starting on January 1, mothers with four children were granted a lifetime exemption from personal income tax, and all working pensioners were exempted from paying contributions. The rate of the small business tax also decreased from 13 to 12 percent, and the sales tax on accommodation providers decreased by 9 percentage points. Furthermore, starting on July 1, the social contribution tax was reduced by another two percentage points.

The tax breaks introduced due to the harmful effects of the coronavirus epidemic have so far left a total of about HUF 400 billion for families and entrepreneurs, he added.

Varga pointed out that Hungary has been at the forefront of tax reduction rankings, and according to the latest OECD summary, the tax burden in Hungary has decreased by the second largest amount.

Among the goals set for the coming years, the minister of finance mentioned that Hungary should be at the forefront of digital taxation in the EU and at the same time be the largest reducer of tax administration. 

A new online system has allowed the tax office to prepare tax returns for 5.5 million individuals, he noted. Meanwhile, businesses will receive assistance in completing the most complex return, the VAT return, and the e-VAT system will debut in the second half of 2021. With this, the government will significantly reduce the tax administration of about 500,000 companies a year, plus, Hungary will be among the first in the European Union to provide VAT return services to businesses next year, he explained.

The goal is to have a unified digital database for all the data that until now had to be sent to various administrative bodies, Varga indicated. He also said that at the initiative of tax advisors, the online invoice program will be expanded with an element that allows online invoice data sent to the tax office to also function as an electronic invoice.

Additionally, by the end of the government cycle in 2022, the number of tax types will have been reduced by at least a third, and through a three-step digitization process, Hungary’s tax administration could be the simplest in the EU in a few years.

Show More

Related Articles

Back to top button