New studies highlight dizzying complexity of Hungarian tax system

Taxes in Hungary are not only high, but also unnecessarily complicated and confusing, and this puts Hungarian companies at a severe competitive disadvantage, new studies unveiled at a conference organized by the Economic Competitiveness Roundtable (GVK) concluded.

According to a study compiled by the University of Pécs, the main problem with Hungarian taxes is not that they are high, but that the tax regime is too complex and confusing, which puts businesses into a precarious position both legally and economically.

Small and medium-sized enterprises, for instance, pay 12 different taxes on average, depending on their income level.

The number of taxes grow with the size of staff. While self-employed enterprises have to pay seven, businesses with 10 staff and over are liable to 17 different taxes.

Small businesses also have a hard time keeping track of fast-changing tax regulations. Nearly two-thirds of them prefer to hire an accounting firm to handle their tax affairs and only 12% manage their own.

Another study, prepared by the Budapest Corvinus University of Economics, found tax administration to be another area dogged by encumbrances. While the state should place more emphasis on inspections, administration needs to be slimmed down through the consolidation of budgetary institutions.

University professor László Szerb urged that Hungary take steps to tighten tax rules, raise penalities for tax evasion and change public perception on taxation.

Allowing multinational companies to publish their financial reports according to International Financial Reporting Standards (IFRS) only, rather than using both IFRS and a Hungarian accounting standards would help toward cutting red tape.

At the same time, László Zara, head of the National Tax Advisors’ Association (MAKSZOE) stressed that without a firm government commitment, none of these recommendations stand a chance become a reality, even though they technically cost nothing.