Humanities and Social Sciences
(dawna nazwa: Ekonomia i Nauki Humanistyczne)
21 (3/2014), DOI: 10.7862/rz.2014.hss.34
MID-TERM EFFECTS OF THE FLAT RATE PERSONAL INCOME TAX IN HUNGARY
Zoltan BARTHA
Submitted by: Justyna Stecko
DOI: 10.7862/rz.2014.hss.34
Abstract
The objective of the paper is to examine whether the advantages and disadvantages mentioned in the literature of the flat rate income tax could be observed in Hungary. Personal income tax data provided by the Hungarian National Tax and Customs Administration was used to check the arguments. It was found that the flat tax indeed favours richer taxpayers, and because of the family tax credits, it heavily favours families with children. Tax revenues declined as tax rates were cut, while the GDP growth rate was close to stagnant. Both of these developments go against the expectations of the flat tax supporters, although it has to be mentioned that the changes were made in the midst of a European- and world-wide depression, which could have distorted the pure effects of the new tax code. Although in many countries the flat rate tax was a positive signal for investors boosting foreign direct investments, the Hungarian government introduced extra taxes on some of the transnational companies in order to balance the budget (and compensate for the lost personal income tax revenues), which meant that there was a decline in the mood of the investors. There is some indication that some illegal activities are shifted to the legal domain: the ratio of those tax reporters who earned an annual income of HUF 2 million or higher has gone from 62.5% to 66.6% in the period of 2010-12.
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About this Article
TITLE:
MID-TERM EFFECTS OF THE FLAT RATE PERSONAL INCOME TAX IN HUNGARY
AUTHORS:
Zoltan BARTHA
AUTHORS AFFILIATIONS:
PhD Zoltan Bartha, Institute of Economic Theory, University of Miskolc, Hungary
SUBMITTED BY:
Justyna Stecko
JOURNAL:
Humanities and Social Sciences
21 (3/2014)
KEY WORDS AND PHRASES:
flat rate income tax, Hungary, tax statistics, income distribution
FULL TEXT:
http://doi.prz.edu.pl/pl/pdf/einh/109
DOI:
10.7862/rz.2014.hss.34
URL:
http://dx.doi.org/10.7862/rz.2014.hss.34
RECEIVED:
2014-06-01
COPYRIGHT:
Publishing House of Rzeszow University of Technology Powstańców Warszawy 12, 35-959 Rzeszow