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Thursday, July 26, 2007

Tax Revenue Up

according to Portfolio Hungary:

"Hungary's public sector revenues managed by APEH rose by nearly 19% in the first half of 2007, the tax authority has announced on Wednesday. Some two thirds of the HUF 635 billion increase came from traditionally key tax revenues, APEH President János Szikora told a press conference"

Obviously this is very good news, and shows that the fiscal deficit may be well on the way back under control. But then again, this isn't the main risk factor in Hungary right now.

On the details:

VAT revenues totalled HUF 1,665.8 bn, 14.3% more than in the base period. While this may seem an extraordinary result, we must note that the medium rate at this tax was raised by 5 percentage points.

Yes, and this explains some of the sharp drop in retail sales. Methinks that when all this is said and done people may need to take another look at the validity of the idea of loading fiscal corrections onto consumer expenditure taxes.

"Personal income tax (PIT) revenues amounted to HUF 801 bn in H1, a 6% growth from the same period of 2006. It is noteworthy that APEH received 140,000 more PIT declarations in the first half of 2007 than in H1 last year (4.362 m)."

Yes, and this is the very good news, associated with the 2whitening" effect that Daniel Antal has been drawing attention to.

1 comment:

Antal Dániel said...

Tax evasion can be a great prisoner's dilema game. Many people do not pay taxes, the government has to rase rates among taxpayers and public services will lack financing. Over a longer period of time people may think that they buy health services on the market (or black market) and do not pay tax and social security at all.

The government seems to have succeeded to break this vicious circle with a very strong penalty: those who don't pay tax will be excluded from the universal health coverage.

The public finances are still not bright, but taxpayers cannot maintain their living standards at these extremely high rates. The people do not seem to think that these tax rates are feasible: the sharp decline in real wages did not result in a sharp decline in domestic demand as people took on huge amounts of loans. The policy-maker has to find the point when enough new taxpayers are drown into the system and it can give a positive motivation to remain a taxpayer (either with lower tax rates or better public services), otherwise people may swith back into the illegal economy in large numbers.

On the migration part I have not seen any signs of higher outbound migration from Hungary.