Hungary, Детальна інформація

The corporate tax is levied on all businesses, no matter how large or small, the same way. As of January of 1995 the corporate income tax has been reduced from 36% to 18% on undistributed profits before tax. this is called either the additional tax or the calculated tax. After this tax has been levied the profits are then distributed among the shareholders and an additional 23% is taxed to the shareholders. To illustrate this tax figure 1.3 demonstrates how the tax is calculated.

fig 1.3

Calculation of Additional Tax

HUF

Income before tax 100.00

Calculated at 18% (18.00)

Income after tax to be distributed 82.00

Amount available for distribution after payment of additional tax (82/1.23) 66.67

Total Tax Paid 33.33

Effective Rate of the additional tax (% of income before tax 15.33%



Source Deloitte & Touche LLP

In addition to the corporate tax employers must also make Social Security contributions. Typically, employers must make a contribution at a rate of 44% of their gross salary. Employees are required to make a 10% contribution, however, it not unlikely to see individuals putting more than 10% away of retirement.

Another tax that employers are subject to is the Unemployment Fund Contribution. This is to continue to support the unemployed between work. Employers must pay 4.2% of their employees gross salary and wages to the Unemployment Fund. Employees are required to pay 1.5% of their salary. However, employees' contribution is tax deductible.

Training Fund Contributions is yet another tax that corporations are subject to. This tax is to provide for the cost of training employees. This contribution is currently paid by the employer at 1.5% of the total payroll. This tax is for corporate income tax purposes.

As with other Hungarian taxes exemptions are offered to certain kinds of business. Hungary grants exemptions on a case by case basis and either dose not grant an exemption or grants a 100%, or 60% exemption. The figure below shows how companies are allowed to use their exemptions.

fig. 1.4

Percentage of Taxes due under specific exemption

18% subject to Corporations 23% subject to Shareholders

100% Exemption 100% reduction No Reduction

60% Exemption 20% reduction No Reduction



Businesses view this set of taxes as equitable and do not squabble over the fairness of the taxes. They seem to be more interested in how to receive tax exemptions and want reform in the exemption granting side of the tax system (Newbery, 8). This is good because of the infectious shadow economy in other former soviet countries. This means that businesses will be more willing to pay taxes that are due to the government.

So What Does this mean for Hungary?

Newbery argues that the Hungarian tax system is at least as egalitarian as any where else in the world as far as an equal distribution of taxes. Especially since the method of redistribution is so good at keeping poverty remarkably low. While the transition still will put a gap between the “haves and the have nots”, the government needs to keep its eye out for the most vulnerable such as the old and unskilled. Many argue that because of the rough transition people may become disillusioned with a market economy and never realize the gains that the countries leaders have fought so hard for. However with vigilance and a little bit of patience Hungary will reach its goal.

Privatization

In addition to using tax collection as a source of raising revenue, Hungary has turned to privatization to offset Hungary’s 31 billion USD national debt (Galai, 1). The sale of government controlled industries such as natural gas, oil, and electric powered utilities has earned the government over 1.4 billion USD in the past year.

Recently the Hungarian Government decided to sale shares in eight of the fourteen nationally owned electrical power and distribution companies. A German consortium agreed to pay 180 billion HUF for the shares and controlling interest in the former government controlled utilities.

In addition to the sale of the utilities Hungary has had discussions about selling the National Bank of Budapest to investors. However analyst point out the bank will have to spend the next year fixing up the bank before they can think about selling it. Government officials would expect a heavy return if the bank were to be sold.

While some analyst applaud the actions the government has taken others wonder who is really in control in Hungary. Is the government still calling the shots or is it the foreign investor with the most money invested in a majority of Hungary's' industry. Another key step to Hungary’s transition to a market style economy is expenditure policy.