Improving Tax Compliance in a Globalized World by Chris Evans et al

Author:Chris Evans et al
Language: eng
Format: epub
Publisher: IBFD
Published: 2018-12-14T16:00:00+00:00

Chapter 19

Hungary

Borbála Kolozs

19.1. The tax gap in Hungary

Tax gap can be defined as the difference between the taxes theoretically payable and the taxes actually paid. It is relatively difficult to determine in advance the theoretically payable amount of tax, and many countries do not even engage in tax gap research. The Hungarian government does not provide estimates of a tax gap. 1 The Hungarian National Bank 2 provides for macro-level estimations of the revenue of the central budget, as well as revenue from various taxes. The National Tax and Customs Administration (Nemzeti Adó- és Vámhivatal) provides statistical data on taxes owed and taxes collected, but none of these estimations can be regarded as tax gap analysis in the technical sense.

A detailed analysis by the World Bank shows that the estimated tax gap in Hungary (as a percentage of GDP) is -0.28. 3 The European Union has attempted in several studies to measure the VAT gap, 4 while the OECD has measured the VAT revenue ratio. The VAT revenue ratio measures the difference between the VAT revenue collected and the theoretically collectible amount of VAT. The VAT revenue ratio is a number between 0 and 1, with 1 being the situation in which all of the theoretically collectible VAT has been collected in reality. The VAT revenue ratio shows not only compliance, but also the non-neutral treatment of goods and services sold with preferential VAT rates or exempt supplies. Hungary’s VAT revenue ratio is 0.52, which puts the country in the average category, according to the OECD. 5

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