“The restructuring of the tax structure conforms to the country’s expectation that while reducing the tax burdens on capital- and work-related income, burdens should increase in the direction of VAT-type taxes”, the Ministry of Finance’s Minister of Sate for Taxation Norbert Izer said in an interview for leading economic daily Világgazdaság.

In the interview, which was published on Monday, Mr. Izer also spoke about the fact that the Cabinet sees no reason for a general reduction of VAT, but investors have confirmed that the fact that we have the lowest level of corporation tax in Europe represents a competitive advantage.

According to Eurostat, in 2017the level of tax burdens fell the most in Hungary: while in 2017 they totalled 39.3 percent of GDP, the 2018 figure was 38.4 percent. Taxes would have fallen even more thanks to the tax cuts, but as a result of the method of calculation the one percent whitening of GDP increased the tax income for last year, he noted. The process of tax reductions continued in 2018, in addition to which the implementation of the agreement concluded between the private sector and the government’s Permanent Consultation Forum (VKF), particularly including the further reduction of employer social tax contributions, means we can also expect increasingly lower tax burdens in future.

In reply to a question, Mr. Izer said the Cabinet sees no reason for a general reduction of VAT. “In places where professional or social policy reasons justify it, the level of VAT has been reduced in recent years, for instance on UHT and ESL milk products”, he explained. The Minister of State also said that the experiences relating to areas in which preferential rates of VAT have been previously introduced are currently being examined, because the reduction did not achieve the required result in all areas and the benefits were not always felt by consumers.

“In the EU, the cardinal question is currently not the level of tax, but the efficiency of its collection. In this respect, we are doing far better than the regional average and have in fact also approached the EU average”, he stated.

In 2012, the VAT gap in Hungary, meaning the ratio of unpaid monies to the VAT due, was still 22 percent. Thanks to the measures aimed at whitening the economy, according to the European Commission’s estimate, by 2016 this ratio had fallen to 13 percent. “The goal is to reduce the index to around 10 percent, which is the EU 15 average, because this is what will enable further tax cuts for taxpayers”, Mr. Izer told the press.