Towards an Incentive Tax System – Reform of the Tax System and Tax Administration in Hungary

Abstract

The secret to successful economic convergence lies in broad-based cooperation between the public and private sectors. The tax system is a priority area, since on the one hand it generates the revenues for the functioning of the state, while on the other hand it regulates the basic conditions of the private economy. In this regard, the tax reform implemented in Hungary after 2010 was a milestone, as it not only changed the tax structure in a growth-friendly manner, but also served to simplify the tax system and reduce tax evasion. The reform of the tax administration was launched in a second round in 2016, with the aim of establishing a cooperative, client-oriented tax authority which encourages taxpayers to adhere to the rules through modern means and appropriate incentives. This study provides an overview of the stages and results of the transformation of the tax system as well as the tax administration to date. By citing successful international examples, we offer suggestions and draw attention to the possibilities of further reform.