GKI: Do Hungarians really pay a lot of taxes?

By: Trademagazin Date: 2024. 07. 24. 12:47

In public discourse, we often encounter criticism of high domestic tax rates. If we are not entitled to discounts, we pay 18.5% of our gross salary as a social security contribution, and 15% is deducted by the state under the heading of personal income tax. From the remaining amount (which is 66.5% of our original income), we buy goods, which are typically charged with an additional 27% VAT. This has already reduced our purchasing power by almost half.

However, the situation is even more bleak: Hungarian companies pay a 9% corporate tax on their profits, and support the state coffers with a 13% social contribution tax on the gross wages of their employees. In addition, companies pay business tax, extra-profit tax and countless other taxes. These are inevitably included in the prices of various products and services.

Although Wagner’s law, according to which the demand for public services and the level of public spending increases in proportion to economic growth, does not prove to be true in all cases, it can still be observed that in more economically developed parts of the world the state collects more taxes in proportion to GDP.

Like all public finances, the Hungarian one derives its income primarily from taxes and contributions. In addition, an important source is EU support, which is outstanding even at the regional level, but in addition, there are other revenues – to a lesser extent – as well.

The proportional income of the Hungarian state to GDP is 3.4 percentage points lower than the EU average, but the Hungarian level of 42% is essentially the same as the average of the other Visegrad countries. We have reached this point in 20 eventful years. When we joined the EU, the Hungarian GDP proportional income was higher than that of our regional competitors, and then the adjustment (austerity) package introduced for the purpose of budget consolidation in 2006 further increased this. In the 5 years following the change of government in 2010, the level of revenues in proportion to GDP rose again (it reached 48.4%), and then the pace of increasing GDP from the middle of the decade was not followed by a similar expansion of revenues, so by the beginning of the twenties the Visegrád countries we were at the level of 46% of the EU average in this regard.