Hungary and Taxing Taxes

Henry Thomson: Distress by Sea (ca. 1804) // Public domain

The number thirteen is commonly recognized as an unlucky number. But for Hungarian businesspeople, the preceding number is worse, as the 12th is the deadline for paying taxes.

It was with considerable dismay that I put the long sequence of numbers for the tax authority’s account into my banking app, and with dismay not worth considering with which I typed in the diminishingly long sequence of digits denoting the amount that I am about to bid farewell to forever.

As soon as my hard-earned money slipped away amid ones and zeros, my brooding was interrupted by a message from my bank. I was charged a transaction fee, as is usual in Hungary as the state imposed taxes on banks which they inevitably pass on to the customer.

This means my taxes are being taxed. This is nothing new nor uniquely Hungarian, but its ubiquity should by no means lend this outrage normalcy.

I started my business as a self-employed entrepreneur under a very favorable tax scheme, which meant I had to pay a fixed amount monthly. The government however recently passed legislation barring those under this scheme to issue invoices to companies, forcing most to switch to less beneficial forms of taxation or shut their businesses for good.

I made the change and my taxes increased to several times the original amount. I have to pay a fixed tax even if I earn nothing apart from a percentage of my earnings. As the legislation forcing me to do so came at a time of runaway inflation and plummeting retail statistics, most businesses could not increase prices high enough to make as much money as before.

However, when transaction fees are added to all transactions, even those which include paying taxes, it is a very grim picture indeed.

Hungary has the highest level of VAT in the EU at 27%, so a stellar amount is, again,picketed by the state on purchases such as food. Then there are the services the state provides. The dismal public transport on life support from taxes, for which I pay to use (in case of trains, it costs more than the private company RegioJet), but for the money I pay double in the form of taxes and ticket prices I get awful service, rude conductors and constant delays.

Healthcare is so bad that the head of the chamber of doctors admitted that people should allocate savings to private healthcare. In fact, on one of the rare occasions I used the free public hospital system, I was forced to stay in a crowded dirty and unpleasant hospital receiving very poor treatment for so long (Hungary has the longest hospital stays in the EU) that I lost so much money from the work I couldn’t do as an entrepreneur that it would have been more profitable to pay for extremely expensive private healthcare.

Education, purportedly also free, suffers the same problem. The centralized school system is lacking funds which is made worse by the worst corruption in the EU. My stepdaughter goes to school in the most affluent area, yet the class was lacking adequate furniture and equipment in the classroom for which parents had to pay. Add to this the high costs of things a child has to bring to classes on which there is also a high amount of VAT.

Despite all these taxes, there is still a budget deficit. So, I, along with my fellow Hungarians, pay taxes for public services that often also take money from us in one way or another and all in vain as the government overspends and creates deficits.

This is hugely unfair. If the government can’t sustain public services adequately despite high taxes, it should reconsider its approach and plan for privatization and tax cuts.

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Mate Hajba
Free Market Foundation