Hungary 86th in PwC and World Bankʼs ‘Paying Taxes’ report

Now in its 13th edition, "Paying Taxes" investigates and compares tax regimes across 190 economies worldwide using a medium-sized domestic case study company, according to the PwC website.

"This year, Hungary climbed seven places from 93rd to 86th," said Krisztina Kőmíves, head of PwC Hungaryʼs tax and legal advisory branch. "The cause of this significant improvement is the decrease of social contribution tax and corporate tax in 2017. In this respect, we expect further improvement in next yearʼs edition, which concentrates on 2018, due to the further decrease of social contributions."

According to the latest edition of the report, there were small changes in global averages, meaning that while 113 countries introduced tax reforms, the reforms were rather limited.

"Hungaryʼs score in tax-related administration did not change since last year," Kőmíves noted. "The primary reason is that there were no actions aiming at decreasing administration in this sector in the year 2017. An improvement could be reached if the tax authority would enhance its data analysis capabilities and as a result further concentrate its control activities."

The report adds that tax authorities in general could do more to completely utilize the opportunities offered by modern technology, in order to decrease burdens related to tax payment duties. Certain developed economies have already improved their systems for both authorities and taxpayers, mainly resulting in such activities becoming less time-consuming and the number of payments decreasing.

Meanwhile, the results also show that some economies are having a hard time introducing online tax declaration and payment, due to the lack of IT infrastructure, cultural boundaries, and complicated rules.

Administrative burdens

The report also claims that the introduction of new tax compliance technologies may increase short-term administrative burdens, hence their introduction needs extensive planning and consultation, as exemplified by China carrying out a permanent series of reforms in recent years.

"In Hungary, actions are taken in the tax field to promote ‘real-time taxation’; however after analyzing the report, it can be concluded that in the short term, these only increase the administrative burden, and that their positive effect may only be felt after years," Kőmíves noted. "Therefore, too fast and too frequent introductions must be treated carefully, and should be handled together with the other steps taken for decreasing administration," she added.

The time and complexity of tax controls can vary greatly. While some taxpayers may spend 128 hours gathering information required for the process, for others it takes merely a few hours.

The improvement of the skills of tax investigators is also important to maintain a well-oiled tax system, the report claims. Some 97% of countries hold training courses for inspectors, but only 35% offer courses regularly.