The Hungarian Path Towards a Competitive Tax System 1988–2024

Supplements to the Tax Pillar of the Competitiveness Program of the Hungarian EU Presidency

Abstract

The paper presents a journey trough the Hungarian tax system from the years of the transition to the present days. It focuses on taxes with special importance from the point of view of the competitiveness of national firms, primarily the SME sector. The paper describes and evaluates the major milestones during the 36 years presented. It covers the reasons and effects of various smaller and larger tax reforms, and also evaluates the direction and trend of the changes supplemented by a brief international outlook. The author emphasizes the special importance of the tax system serving the competitiveness of SMEs in 2024 and the lessons of a retrospective analysis. It primarily focuses on the content elements of the most important taxes – profit taxes, payroll burdens, social security fees, local taxes – and presents the evolution of tax rates and tax incentives in more details. Since competitiveness is an important element of a country’s ability to attract foreign capital via direct investments, the article covers the development of foreign companies’ opportunities and the specific tax rules applicable to them from the years of the transition from socialism to the present day.