Tax System and economic growth In Hungary

Osmanli Nijat (2020) Tax System and economic growth In Hungary. Pénzügyi és Számviteli Kar.

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Absztrakt (kivonat)

<p>The average personal income tax rate in Europe is well above 30 per cent; thus, Hungary is in a very favorable position. Bulgaria has the lowest rate of personal income tax within the EU, followed by Hungary and Lithuania, although in Sweden it is the highest. Appropriately that in Hungary the rate of personal income tax is lower than in neighboring Slovakia.</p><p>Another downside of the Hungarian tax system is that it has been offering assistance to families through the family tax allowance since 2011. Family tax exemption is a tax deductible incentive; its size depends on the number of dependents within a family. The family tax exemption is HUF 10 000 for one dependent, HUF 12 500 for two dependants and HUF 33 000 for three or more dependents. Supporting couples to have children through the tax regime serves the Government's strategic goal of reversing the country's multi-decade trend of falling birth rates.</p><p>It is also expected that lending will be fuelled by financial instruments used under EU funding schemes, which may help companies obtain funds that would otherwise not be able to obtain them. The revival of lending will improve economic growth both in the short and long term by realizing investment ventures, as growth in investment creates extra demand within the economy, which in turn increases production in businesses. Corporate profit taxes are also particularly favorable in Hungary, as according to an OECD report Slovenia was the only country where businesses had a lower corporate income tax-to-GDP ratio in 2019 than they did in Hungary.</p><p>The efficiency of tax collection is another key indicator of the competency of a country's tax system. The Hungarian Government has made strenuous efforts to improve fiscal transparency by increasing the collection of efficiency taxes. As one of the steps taken in this direction, the National Tax and Customs Administration (NAV) of Hungary became a two-tier institution within the Ministry of National Economy's sphere of competence as of 2019. Under the new system, citizens who contest a first-instance tax authority decision may contact an Appeals Directorate. The reform of the organizational structure of NAV will lead to a considerable streamlining by uniting once highly consumed units.</p><p>Public and private charities and water management associations are obliged to pay corporate tax in contrast to Germany in Hungary. It is obvious that charities are not focused on making profit by simply fulfilling social responsibility within the society. I would advise that no tax.</p><p>simplified version should be charged to public or private charities. They can thus keep more resources for allocating and fulfilling their social responsibility.</p><p>There is another point to highlight: corporate tax credits. In Germany a company can claim tax credit up to EUR 500,000 25 percent of research staff's salaries and wages. This is a good motivation for companies to go deeper into the R&D activities.</p><p>I suggest bringing this experience to the Hungarian corporate tax system as well, as detailed research will drive improved production and, as a result, trigger small and large-scale economic development.</p><p>Complicated situations also exist with the construction companies. It takes 102 days to deal with building permits, and involves navigating 26 procedures. Many intergovernmental departments must complete the inspections before companies receive a Municipal Planning Committee statement and a Tax Authority letter. Once all the criteria have been met, they must obtain an Occupancy Permit and complete the building's registration at the Land Registry Office.</p><p>It takes about 277 hours, according to the experience of some taxpayers paying tax due to some problems. Tax authorities should take more action to manage avoidance of uncertainty and make processes easier for taxpayers.</p><p>Another issue for companies planning business model with import and export activities should take into account that the import process takes 17 days and the export process takes about 19 days in Hungary and is a slow showcase for a European country.</p><p>First of all, it should be mentioned that the highest VAT rate in Hungary is 27%. This leads to the latest customer the product price very high especially with products that are not entitled to reduced tax rates. If we calculate a product outside the EU with a value of 100 euros entering the Hungarian and German markets, the final cost of the product will automatically be 8 euros higher after VAT and we even consider machinery or higher valued items.</p><p>Another good experience from the German VAT experience can be copied is about the rate of taking-away food. It is obvious that we need takeaway food because of the fast-pacing lifestyle and most of us use it at least twice a week. Decreased VAT rates can decrease the price payable by end-users in this type of food.</p><p>The other suggestion could be about the books and e-books charged for VAT. I am an ACCA student and I need to buy books and pass exams for each paper to reach higher goals. It is obvious that ACCA is a profit-making company in itself from its services, but as a student I am not happy to pay 5% VAT for a book and 27% VAT for an exam. I think that all these educational means should be outside the scope of VAT.</p><p>The introduction of reverse-charge VAT has also contributed to tax collection efficiency for some agricultural products. Under reverse-charge taxation, producers sell goods at net prices, without charge of VAT, which will be reported by the buyer and paid later. The VAT reversal law boosts tax control efficiency by formulating new data reporting requirements that must be met within the scope of reverse charge VAT by both sellers and purchasers of the products. This helps fighting VAT fraud in the agricultural sector.</p><p>As an EU country, Hungary attracts foreign investment, allowing countries to develop their PIT system with some tax incentives for new start-ups.</p><p>The idea is to purchase shares in an innovative start-up and receive an investment grant of 20 per cent. When they invest at least 10,000 Euros per company. Angel investors can claim up to €500,000 per annum for an investment acquisition grant.</p><p>Since 2017, in the event of a share being disposed of, angel investors can compensate the taxes paid on profit with an exit grant of 25 per cent of profit. That applies to the shares from which the grant was made for the acquisition. The shares must be sold within 10 years and the cost of acquiring the acquired shares must not exceed 80 percent of the exit grant.</p><p>I would like to draw your attention to the Hungarian pension system, too. I think it's well organized but we can bring the UK pension system experience at the same time. In addition to normal pension schemes, as you know in UK, individuals can make contributions to their pension accounts. They can decide this amount, and they can withdraw up to a certain threshold when they reach retirement age and get the remaining part of it monthly. I think that this method can motivate people to invest more in pension funds in the pension system.</p><p>Lots of candidates aren't happy with the social contribution rate. Specifically employees paying contributions more than income tax. The rates for health contributions are 4.5 per cent and 3 per cent but the quality of medical assistance does not match it. Government should be more focused on developing the quality of medical services that match the amount of contributions charged to staff.</p>

Intézmény

Budapesti Gazdasági Egyetem

Kar

Pénzügyi és Számviteli Kar

Tanszék

Pénzügy Tanszék

Tudományterület/tudományág

NEM RÉSZLETEZETT

Szak

Pénzügy és Számvitel szak angol nyelven

Konzulens(ek)

Mű típusa:	diplomadolgozat (NEM RÉSZLETEZETT)
Kulcsszavak:	adatbázis szerkezet, economic developement, tax, tax accounting, taxation
SWORD Depositor:	Archive User
Felhasználói azonosító szám (ID):	Archive User
Rekord készítés dátuma:	2020. Dec. 28. 06:22
Utolsó módosítás:	2021. Már. 29. 09:08

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