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Special Tax, Supplementary Tax, Contribution – A Significant Increase in the Number of Taxes

Special Tax, Supplementary Tax, Contribution – A Significant Increase in the Number of Taxes

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Social and economic changes in 2022 have broken a long downward trend recently, with the number of tax categories increasing from 51 to 59 last year. We give you the latest lowdown.

After 2016, the number of taxes in Hungary steadily decreased – from 60 in that year, it had fallen to “just” 51 by the end of 2021. Sadly, this trend did not continue in 2022 – in fact, we saw the opposite: the number of taxes increased again, up to nearly sixty. What’s more, the number 59 is the result of a somewhat conservative and restrained count, as we will explain below. The increase is not surprising, of course, when seen in the context of wider social and economic developments: the budget deficit has grown, inflation is high and we are also facing a very specific energy-market situation characterised by both a shortage of energy and, at the same time, genuinely “extra” profits being earned by certain energy companies.

And extraordinary situations have clearly called for extraordinary measures.

KATA – gone, but not really

It had been a long time since taxation was so much at the fore of public debate as it was when KATA, the flat-rate tax on small businesses, was (almost) scrapped. While whether this tax served to whiten black incomes or increase grey incomes is a moot point, the legislator saw it as a hotbed of trickery and deceit and thought it better to severely limit its applicability. Contrary to popular belief, however, the KATA tax has not disappeared, but has instead been drastically reformed, so that only a very narrow circle can now benefit from it. In other words, although for many it has ceased to exist, it has not meant that we now have less tax to pay.

A special tax on special taxes is not a new tax

In our country, it is virtually coded into us that there’ll be a pretty large number of taxes, as the system of “special taxes” as they’re known has become almost a traditional feature of our tax policy. And last year, we were introduced to a new term, the “supplementary tax”, which is actually a special tax on the special tax. This none-too-noble bunch includes the retail supplementary tax and the insurance supplementary tax.

These could be considered completely new taxes, but for technical reasons, we did not regard it justified to do so. These levies, albeit under a new name and enacted in new legislation, have increased the rate of existing taxes without changing the tax object, or the tax subject, or even the tax base. For this reason, they cannot theoretically be considered as separate, standalone taxes, and therefore do not add to the already significantly increased number of taxes.

The “real” special taxes

However, last year there were also some “real” special taxes; those that either had not existed before or that revived moribund taxes of old. These include the special tax on credit institutions, the special tax on petroleum-product manufacturers, the special tax on KÁT/METÁR producers, a special tax on the supply of balancing energy capacity and a special tax on pharmaceutical producers. But, to add to the definitional confusion, the government has also introduced a (securities) transaction tax and a telecoms supplementary tax as such special taxes. The latter were already considered as separate tax types, as their tax base (and to some extent their taxable object) is different from that of their namesake relatives.

An interesting feature of the special taxes is the “airline contribution”, introduced last year, which has taken on an importance that extends beyond itself. While the tax has been the focus of a war of words between the airlines and the government, it has also captured the imagination of one of Budapest’s municipalities, part of whose territory is occupied by Liszt Ferenc International Airport. The municipality in question probably drew inspiration from this special tax when it tried to introduce a municipal tax based on passenger traffic. Although these efforts have not proved successful, as the Supreme Court has suspended its applicability at least for now, it does illustrate the conventional wisdom that, given enough creativity, there are very few things that cannot be taxed.

By Tamas Feher, Partner, Jalsovszsky


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