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The government may benefit from a value-added tax, and new tax packages are expected

Exceptional tax and crisis corrective measures recently announced – including for users affected by overhead cuts stenosis, as well as curbing or halting public investment – it is not certain that until this year they will have sufficient additional resources to finance the budget. It is not even clear where the EU aid disbursement appears to have stopped and the money will not arrive until an agreement is reached with the European Commission.

Meanwhile, public debt has been severely eroded and the budget has been turbulent. Magyar Nemzeti Bank is now warning of urgent action – which it has taken twice – while refraining from taking polarized opinions on these issues – called Sándor Szmicsek, partner at Mazars Audit and Consulting.

The Hungarian government will certainly need more money if the funding problems are not alleviated. For example, the 2023 budget is unclear from the draftWhy do they expect a 30 percent rise in VAT revenue. According to the government, about 7,100 billion Swiss francs of VAT could flow into the budget next year, while the appropriations in 2022 were only 5,487 billion euros. However, we do not consider that the inflationary effect explains such a jump. (In addition, next year’s budget is designed to reduce the rate of deterioration to 5.2 percent.)

It is not known if the VAT rate can be raised again, but we expect more regulatory changes, as we don’t see how the additional revenue could be generated any other way.

Smicsek confirmed.

However, it is absolutely certain that in addition to yesterday’s Power Law, another 2-3 tax packages are expected this year, since so far the “extra profit tax” has been issued only in the form of a government decree, which is only possible in the emergency law. However, as per usual practice, these temporary measures will be enacted at a later date, as was the case with the rule for raising the corporate vehicle tax, now included in the Pending Adoption Act, assessed by Dániel H. Nagy, Mazars Director of Taxation .

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What can the government do? They can get discounts, and they can filter out scammers

Previously appeared in the catalog Analytics According to the commission, in the absence of an increase in the excise tax, in extreme cases, VAT deductions can be deducted even for some products and services, if the credits are to be met. However, for most products subject to VAT, the benefits are unlikely to be canceled in view of official prices: for example, slaughter animals, pork or beef products fall into this category, and there will be no significant increase in revenue. Expected medication and aid. It may well be that in 2021, the 5 percent discounted home tax on the sale of newly built property is rolled back. (Detailed list of beneficiaries You can find it here.)

Mazars 2022 Central and Eastern Europe From her tax handbook By the way, it turned out that in 22 examined countries, including Hungary, value-added tax is still the main source of tax revenue. It can be seen that the focus of tax policy is on enhancing the role of consumption taxes. This is because they are not a barrier to investment and are therefore more suitable for growth. The local VAT margin – the ratio of uncollected VAT to the theoretical value – has fallen steadily since 2010, showing that the IRS can collect VAT more efficiently than before. They see this as a result of using digital data technologies, which Hungary has pioneered in recent years.

(We add that though, in 2021, there will still be around HUF 500 billion in VAT revenue lost track – This is the amount that the fraudsters did not pay. This rate of tax evasion alone is not outstanding in the EU or the region, which means that there may be significant additional reserves in the tax control and collection system.)

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The sales tax rate in the region has remained unchanged over the past year, with standard value-added tax rates hovering around 21 percent on average.

The standard VAT rates of 27% and 25% in force in Hungary and Croatia remain particularly high.

Hungary is also one of the best performing countries in terms of tax wedges

According to the advisory firm’s publication, taxes and contributions to income and employment typically decreased in 2022, but their current levels vary markedly across the countries studied. Their costs represent an average of 15 percent of total salaries in the region, but there is a significant difference of more than 30 percentage points between the lowest and less than 5 percent (eg Romania) and the highest employer burdens over 30 percent (eg Czech Republic and Poland) and Slovakia).

A more practical way of comparing the schemes is the so-called tax wedge, which shows the percentage of total income a state withholds in the form of tax and contribution burden. It shows how much the tax on labor income will hinder employment, that is, what percentage of labor costs will go to the state budget in some form.

If an employer in Hungary pays the minimum gross wage of 200,000 HUF, one without children For an employee, this means his total cost of HUF 226,000, while an employee can receive HUF 133,000. So the ratio of total taxes/total labor costs is 41 percent, depending on which one

Hungary has the highest tax wedge associated with Romania and Bosnia and Herzegovina.

This is despite the fact that the Hungarian government has done a lot in recent years to improve the weight of taxes on labor income in order to improve economic performance. This year, for example, the social contribution tax (soco) has been reduced to 13 percent from January 1, which will further improve competitiveness by eliminating the 1.5 percent vocational training contribution, Mazars said. However, the value of the salary depends not only on the salary level of the employee, but also – as in Hungary – on his marital status: the net salary of those who raise several children is noticeably higher in Hungary and the tax wedge is narrower in their lifetime. issue.

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Another record: they “infect” large companies less than the general public

It’s still clear that every country places a very different focus on taxing corporate profits: the difference between the lowest and highest tax rates is 22 percentage points. They warned that Germany has the highest level of corporate income tax (31 per cent) and Hungary the lowest (9 per cent). Regarding corporate income tax, it should be noted that Hungary and Latvia still do not apply withholding tax on capital income.

Keeping corporate income tax low contributes to productivity growth by supporting investment. At the same time, in addition to the 9 percent tau, the 2 percent business tax is included in the overall picture, which may represent an even greater burden, since wage costs cannot be deducted from the tax base. Taxes based purely on sales, such as the retail tax, do not fit into the system, yet they are often resorted to by the government; Nagy said, for example, that advertising tax will be reimposed.