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Hungary Taxes
In a command economy, the state collects taxes and
other
charges from enterprises, collectives, cooperatives, and
individuals and redistributes the revenue to fund public
consumption, new investment, and subsidies for enterprises
unable
to cover costs. In the late 1980s, Hungary's tax system
was very
complex. Few tax rules applied uniformly to all
enterprises; some
tax scales were custom-fit for individual enterprises,
sometimes
even within the same branch, and the government often
granted
one-time tax exemptions to financially strapped
enterprises. In
1988 Hungary became the first communist country to
introduce
value-added and personal-income taxes. The government
originally
intended to use these new taxes to supplant capital,
accumulation, wage, and local taxes on enterprises, but it
did
not abolish all of the existing taxes.
The 1988 tax law for the first time required state
enterprises, private businesses, and individuals to
account for
all business transactions. The government introduced the
value-added tax in order to switch its revenue source from
the
enterprises to consumers; to increase labor expenses in
order to
improve labor efficiency; to increase prices and enable
the
government to reduce state subsidies; to raise import,
raw-material, and energy prices to encourage their
efficient
utilization; and to enhance incentives for export
production. The
government levied the personal income tax in order
minimize net
income differentials in the state, cooperative, and
private
sectors; to stifle the growth of the underground economy;
to tap
previously unreported private income; and to create a
means to
adjust taxes for inflation. The levying of a
personal-income tax
was also intended to help eliminate other kinds of taxes
that
impeded productivity.
Data as of September 1989
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