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Where Is The Hungarian Local Taxation Heading?

Author

Listed:
  • Eva Darabos

    (University of Debrecen, Debrecen, Hungary Institute of Accounting and Finance, Faculty of Economics and Business)

  • Kornel Toth

    (University of Debrecen, Debrecen, Hungary Institute of Accounting and Finance, Faculty of Economics and Business)

Abstract

Operation of the Hungarian municipalities has undergone significant change since 1990. While the regulation aimed to decentralise the tasks and sources after introducing the municipal system, the government has taken measures strengthening the centralization since 2010. Aim of the treatise is to present the weight of budget of municipalities within the state finances, the role of own revenues and local taxes in the budget of municipalities, highlighting the development in amount of the business tax by settlement type. Ratio of the own revenues and local tax revenue have increased in the budget revenue of municipalities and the local business tax paid by the companies has played a bigger and bigger role. In addition to the restructuring of resources, the scope of compulsory tasks has also decreased; the state has taken over the public education and the specified areas of health service which has resulted in a decrease of almost 30% in the budget revenue of municipalities. Due to the territorial concentration of the country, the capital and its districts as well as the cities with county rights levy more than 60% of business tax. The largest companies have settled in the capital and most of the undertakings also operate here so the HIPA revenue concentrates here as well. Since 1 January 2015, there has been a change in utilizing the classical taxes: the revenues from the local business tax shall/may be used for funding the social services belonging to the competence of the body of representatives and for the wage costs of office workers. Since 1 January 2015, the municipalities are allowed to introduce not only local taxes but a settlement tax insofar as it is not prohibited by other law as well as the subject of the settlement tax is not burdened by any common charge. The revenue from settlement tax may be used for funding social services and settlement development only. However, according to the first experiences, a restructuring of local taxes has started by introducing the settlement tax and limiting the utilization of local business tax in bigger settlements. Based on the data, it can be stated that there has been a significant change in the structure of revenues of municipalities since 2008; the local taxes play a decisive role in the budget revenues and those ones serve as important sources of funding.

Suggested Citation

  • Eva Darabos & Kornel Toth, 2016. "Where Is The Hungarian Local Taxation Heading?," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 823-833, July.
    • Handle: RePEc:ora:journl:v:1:y:2016:i:1:p:823-833
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    References listed on IDEAS

    as
    1. Camila Vammalle & Claudia Hulbert, 2013. "Sub-national Finances and Fiscal Consolidation: Walking on Thin Ice," OECD Regional Development Working Papers 2013/2, OECD Publishing.
    2. Paolo Liberati & Agnese Sacchi, 2013. "Tax decentralization and local government size," Public Choice, Springer, vol. 157(1), pages 183-205, October.
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    More about this item

    Keywords

    municipality; state finances; budget; local taxes; business tax;
    All these keywords.

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems

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