Abs ac —Na u e and amoun o axes and o he cha ges,
he s uc u e o he ax sys em may signi ican ly a ec he
compe i i eness o na ional economies. Coun ies wi h highe
ax a es may ge in o in a less a ou able compe i i e si ua ion
compa ed o coun ies wi h lowe ax a es. Howe e , he
main aining he budge a y discipline and a oiding an excessi e
go e nmen de ici may es ic i ely a ec he endea ou o
dec ease ax bu den. The na u e and ex en o axes on labou
income and pa a- iscal con ibu ions ha e changed in Hunga y
o e he examined pe iod (be ween 2002 and 2011). The
p og essi e axa ion on labou income was eplaced by he la
income ax a e (16%) in 2011. The s udy examines he impac
o changed pe sonal income ax sys em on he ax bu den o
labou income.
Keywo ds—educa ional le el, la ax a e, implici ax a e,
ax bu den.
I. INTRODUCTION
HE compe i i eness o economies and he
p o i abili y o domes ic and o eign in es men a e
g ea ly a ec ed by he axes le ied on capi al and he
ex en and na u e o axes le ied on labou o which can
be signi ican ax bu den on he economic ope a o s. The
high ax bu den may esul in dec ease o labou supply,
indi idual’s incen i es o legal wo k and employmen
wi hin legal amewo k. Unde highe employe ’s ax
liabili ies, he labou cos is highe oo. I may esul in
mo e expensi e labou cos and he educ ion in
compe i i eness. Due o he change o he p og essi e
sys em o pe sonal income ax o he la income axa ion,
axa ion may become mo e simpli ied and anspa en ,
inc ease willingness o pay axes, especially i he amoun
o ax exemp ions and ax allowances a e dec eased o
elimina ed. To each a ou able de elopmen i is e y
impo an o dec ease he amoun o o he dues such as
employe and employee social secu i y con ibu ions and
con ibu ions o he Unemploymen Fund, especially i
he pe cen ages sha e o o he dues on labou is
signi ican in ax liabili ies be o e he ax sys em changes.
The main goal o his pape is o examine he amoun o
ax bu den on labou and o analyze he e ec o he
newly in oduced la ax a e on ax bu den. We
calcula e he implici ax a es (ITRs) by educa ional le el
and age in Hunga y be ween 2000 and 2011.
II. TAX BURDEN ON LABOUR INCOME
The pe sonal income ax sys em was in oduced in
Hunga y in 1988. The na u e o he pe sonal axa ion was
p og essi e be ween 1997 and 2010. The h ee ax
b acke s in oduced in 1999 we e eplaced by wo
pe sonal income ax b acke s in 2005. This wo-b acke
ax sys em emained alid o six yea s wi h annually
changing ax a es and limi s o ax b acke s (excep o
2008), as shown in Fig. 1. and Fig. 2.
Fig. 1. Limi s o he pe sonal income ax b acke s in Hunga y
be ween 2002 and 2011 (HUF) [1].
Pe sonal income ax sys ems ha e been cha ac e ized
by simpli ica ion among OECD coun ies. OECD
coun ies ha e mo ed owa ds a educ ion in op
s a u o y pe sonal income ax a es, inclusi e o su axes
and sub-cen al income axes [2]. The OECD-wide
a e age op s a u o y pe sonal income ax a es dec eased
subs an ially in each o he las h ee decades, be ween
1980 and 2010 [2]. Among he 22 OECD coun ies o
which da a a e a ailable o 1981, 2 o hem (I aly (32)
and Spain (30)) had 30 o mo e (non-ze o) income ax
THE EFFECT OF CHANGES IN PERSONAL
INCOME TAX SYSTEM ON TAX BURDEN
IN HUNGARY, BETWEEN 2002 AND 2011
Judi T. KISS1,
1Uni e si y o Deb ecen, [email protected]
T
ANNALS OF THE ORADEA UNIVERSITY
Fascicle o Managemen and Technological Enginee ing
ISSUE #1, MAY 2013, h p://www.im uo adea. o/auo. m e/
151
b acke s, 3 o hem had mo e han 20 ax b acke s and 9
o he coun ies had 10 o mo e b acke s [2].
Fig. 2. The pe sonal income ax a es in Hunga y be ween
2002 and 2011 (%) [1].
Among he 22 OECD coun ies o which da a a e
a ailable o 1981, 2 o hem (I aly (32) and Spain (30))
had 30 o mo e (non-ze o) income ax b acke s, 3 o hem
had mo e han 20 ax b acke s and 9 o he coun ies had
10 o mo e b acke s [2]. In con as , o he yea 2010
only 2 o he 34 OECD coun ies had 10 o mo e ax
b acke s and 3 coun ies es ablished a single pe sonal
income ax – he Czech Republic, Es onia and he Slo ak
Republic [2]. The la income ax sys em wi h he 16%
ax a e was in oduced in Hunga y in 2011. Ou o he 26
OECD coun ies o which da a a e a ailable o 1990
and 2000, 10 coun ies had ewe b acke s in 2000 han
in 1990, and 7 coun ies (Finland, Iceland, Mexico, he
Ne he lands, New Zealand, he Uni ed Kingdom and he
Uni ed S a es) enhanced he numbe o ax b acke s [2].
The numbe o ax b acke s emained unchanged in 9
coun ies (Belgium, Canada, Denma k, Ge many, Is ael,
Japan, Po ugal, No way and Swi ze land) be ween 1990
and 2000 [2].
Beside o he simpli ica ion o he schedules o
pe sonal income ax, he ax a es o he highes ax
b acke s dec eased oo. The a e age op s a u o y a es
ac oss OECD coun ies was 46.5% in 2000, and i
declined by 4.8 pe cen age poin s o 41.7% in 2010, as
shown in Fig. 3. [2].
Beside he pe sonal income ax paymen obliga ions,
he pa a- iscal paymen s also belong o he ax paymen
obliga ions on labou income such as he employe ’s and
employee’s social secu i y con ibu ions. In ha case, i
we ake in o accoun he wo k ela ed income axes, ax
educ ion and pa a- iscal cha ges, hen he highes alue
o di e ence be ween op s a u o y ax a es and all-in ax
a es was in Hunga y (25.6 pe cen age poin s) in 2010, as
shown in Fig. 4. [2].
Fla pe sonal income ax can be ound in se e al
membe coun ies o he Eu opean Union such as in he
Czech Republic, Es onia, Hunga y, La ia, Li huania,
Romania, and he Slo ak Republic.
Fig. 3. Top combined s a u o y pe sonal income ax a es in
2000 and 2010 (OECD coun ies) (%). [2]
Fig. 4. Top combined s a u o y and all-in ax a es on wage,
income, 2010 (OECD coun ies) (%) [2]. “The op “all-in” ax
a e is he ma ginal pe sonal ax a e paid by households on he
i s cu ency uni o axable income subjec o he op s a u o y
ax a e. The op s a u o y ax a e is he op combined s a u o y
pe sonal income ax a e in he ax a e schedule” [2].
III. THE APPLIED CALCULATION METHOD
The ax bu den on ea ned income can be measu ed by
se e al indica o s such as a e age ax a es, e ec i e ax
a es, ma ginal e ec i e ax a es and implici ax a es
[3]-[5]. The ITRs gi e a measu e o he e ec i e a e age
ax bu den on di e en ypes o economic income o
ac i i ies. The ITRs a e gene ally de e mined on labou ,
consump ion, capi al, business income and co po a e
income [6]. The ITRs a e gene ally quan i iable by he
agg ega e ax e enues as a pe cen age o he po en ial
ax base.
Acco ding o he Eu os a examina ions o Taxa ion
ends in he Eu opean Union, ITR is de ined as he
ollowing:
„The ITR on employed labou is de ined as he sum o
all di ec and indi ec axes and employees' and
employe s' social con ibu ions le ied on employed
labou income di ided by he o al compensa ion o
ANNALS OF THE ORADEA UNIVERSITY
Fascicle o Managemen and Technological Enginee ing
ISSUE #1, MAY 2013, h p://www.im uo adea. o/auo. m e/
152
employees wo king in he economic e i o y inc eased.
[7; p. 28]”
We calcula ed he ITRs on labou in a speci ic way,
namely using by mic o-economic app oach in place o
mac oeconomic calcula ion. We de e mined ax liabili ies
o single pe sons wi hou child en ins ead o agg ega es
ax e enues. The implici ax a e (
j
ITR
a
j
- h
schooling le el) is he a io o pe sonal income ax and
o he ax liabili ies o he o al compensa ion o
employees (g oss wages):
.
G
j
employe
j
employe
j
G
j
employee
j
employee
j
j
j
W
OCSSC
W
OCSSCPIT
ITR




(1)
whe e
j
is he schooling le el,
G
j
W
is he axable g oss
ea ning (p e- ax ea nings) a
j
- h schooling le el,
pe sonal income ax
j
PIT
is he pe sonal income ax,
employee
j
SSC
and
employe
j
SSC
is employee’s and employe
social secu i y con ibu ions,
employee
j
OC
and
employe
j
OC
is employee’s and employe o he con ibu ions such as
employees and employe s con ibu ion o he
unemploymen und.
Da a o g oss ea nings by educa ional le el and age
g oup we e p o ided by he Hunga ian Minis y o Social
A ai s and Labou . Taxes on g oss ea nings and o he
ax liabili ies we e calcula ed om g oss ea nings using
da a acqui ed unde he Ac on Pe sonal Income Tax o
he yea in ques ion [8].
Main elemen s o he ITR:
1) compensa ion o employees wi h wages and sala ies,
2) employe s’ social secu i y con ibu ion,
3) employees’ social secu i y con ibu ion
4) employe con ibu ion o he unemploymen und,
5) employee con ibu ion o he unemploymen und,
6) amoun o ax c edi ,
7) less subsidies ecei ed by employe .
IV. CALCULATION RESULTS
Ou pu pose is o examine he ax bu den on
indi iduals wi h di e en ea nings. Acco ding o he
human capi al heo y educa ion can be seen as an
in es men in o he indi idual’s human capi al, his
means ha ea nings inc ease as indi iduals’ educa ional
a ainmen and yea s o wo king expe ience inc ease oo.
In his s udy, he indi iduals’ ea nings a e di e en ia ed
acco ding o highes comple ed educa ional le el and
age; i. e. indi iduals wi h highe educa ion le els ha e
la ge ea nings compa ed o indi iduals wi h lowe
educa ional le els.
On he basis o ou calcula ion, he ITRs a e
signi ican ly highe o indi iduals wi h uni e si y o
college deg ee han o indi iduals wi h seconda y o
lowe educa ion be ween 2002 and 2010, as shown in
Fig. 5., Fig. 6. and Fig. 7.
The ITR was he lowes o indi iduals ha ing
comple ed p ima y school s udies, he alue o he ax
bu den was di e en (be ween 56 and 59%) acco ding o
age in 2002. We ha e ound he highes ax bu den (72%
- 75%) o indi iduals wi h uni e si y deg ees in 2002.
The ITR inc eased o indi iduals wi h uni e si y o
college deg ees un il 2008 wi h empo a y sligh ly
dec eases and inally eaching he 80%, as shown in Fig.
5. and Fig. 6.
Fig. 5. Implici ax a es on labou by educa ional le el and
age in Hunga y, 2002 (in %)
Fig. 6. Implici ax a es on labou by educa ional le el and
age in Hunga y, 2008 (in %)
A e 2008, he ax bu den dec eased by mo e
pe cen age poin s and one yea be o e he in oduc ion o
he linea ax sys em (in 2010), he ITR was be ween
59% and 72% o indi iduals wi h uni e si y deg ee (and
58% and 66% o indi iduals wi h college deg ee).
Compa ed o indi iduals ha ing comple ed e ia y
educa ion simila changes cha ac e ized he de elopmen
o ax bu den o indi iduals wi h seconda y o lowe
educa ion. The ITR was he la ges (72%) in 2007 o
indi iduals wi h seconda y school a ainmen .
ANNALS OF THE ORADEA UNIVERSITY
Fascicle o Managemen and Technological Enginee ing
ISSUE #1, MAY 2013, h p://www.im uo adea. o/auo. m e/
153
Fig. 7. Implici ax a es on labou by educa ional le el and
age in Hunga y, 2011 (in %)
In he case o p opo ional ax sys em, he ITR is
cons an i he o he ax liabili ies can be cha ac e ized by
linea ax a e. The ITR unde linea ax sys em is he
ollowing:
.asscasscpi
W
WasscWasscWpi
ITR
employe employee
G
j
G
j
employe G
j
employee
G
j
j




(2)
whe e
pi
is pe sonal income ax a e,
employee
assc
and
employe
assc
mean all he pa a- iscal cha ges, ax
employee’s and employe ’s ax liabili ies (excep o
pe sonal income axes) such as heal h secu i y
con ibu ion, pension secu i y con ibu ion, employe ’s
and employee’s con ibu ion.
We can see on Fig. 7. ha he ITRs a e di e en by
educa ional le els and age in 2011. The eason o he
di e ences in ITR’s is ha he ax c edi possibili y on
ea ned income emained in o ce in 2011. Acco ding o
he Hunga ian Ac 1995 on Pe sonal Income Tax, ax
c edi was calcula ed as 16 pe cen o wage income
ea ned inc eased by 27 pe cen , wi h he mon hly
maximum o HUF 12 100 (yea ly HUF 145 200) in
2011. The ax c edi was ully adap able o employees
whose annual wage income (mul iplied by 1.27) did no
exceed HUF 2 750 000 and i was pa ly a ailable (in
g adually dec easing amoun s) o annual income
(mul iplied by 1.27) o up o HUF 3 960 000.
The ITRs dec eased ela i ely du ing he examined
pe iod, howe e , he o al educ ions in he alues o
examined ax bu den in 2011 we e mainly de e mined by
he supe g ossing ha is ac ual assessmen o income.
Supe g ossing was in oduced in pe sonal income
axa ion by he go e nmen in July o 2009. The supe
g ossing emained alid du ing he in oduc ion o linea
pe sonal income ax sys em. Supe g ossing means ha
he ax base had o be inc ease by 27 pe cen in 2011, he
ac ual ax a e was 20.32 pe cen (
27.116.0 
).
We can see on Fig. 5 and Fig. 7. ha he amoun o
ITRs dec eased by 10-12 pe cen age poin s o
indi iduals wi h uni e si y o college deg ee be ween
2002 and 2011.
The ax bu den (ITR’s) dec eased by 4 pe cen age
poin s o 12 pe cen age poin s o seconda y school
g adua es. The educ ion in ax bu den (ITR’s) is he
lowes ex en o indi iduals whose highes comple ed
le el is p ima y school. Thei ITR declined by 4
pe cen age poin du ing he in es iga ion pe iod, as sown
in Fig. 5. and Fig. 7.
V. CONCLUSION
Six Cen al and Eas e n Eu opean coun ies adop ed
la a e ax sys ems be o e 2011. The linea pe sonal
income ax sys em was in oduced in Hunga y in 2011
oo. The main pu pose was o educe he ax bu den and
o simpli y and make he ax sys em mo e anspa en . In
ou s udy we examined he a e age ax bu den by
educa ional le els and age by calcula ing ITRs on labou
income wi h mic o-economic app oach. O e all, he gap
o he o al ax as a pe cen age o g oss ea nings
dec eased o indi iduals wi h di e en wage income due
o he in oduc ion o la ax pe sonal income ax sys em.
The gap o he ITRs o indi iduals wi h he lowes and
highes educa ional le els who ep esen he indi iduals
wi h lowes and highes g oss ea nings dec eased om 16
pe cen age poin s o 8 - 10 pe cen age poin s depending
on age be ween 2002 and 2011.
REFERENCES
[1] NTCA – The Na ional Tax and Cus oms Adminis a ion o
Hunga y, “Tax Schedules, 1988-2013”.
h p://www.na .go .hu/na /szolgal a asok/adokulcsok_ja ulekme
ekek/ado ablak. 2013.
[2] OECD, “Taxing Wages 2011”, OECD Publishing.
h p://dx.doi.o g/10.1787/ ax_wages-2011-en, 2012.
[3] Ba o, R. J. and C. Sahasakul, “Measu ing he A e age Ma ginal
Tax Ra e om Indi idual Income Tax”, The Jou nal o Business
ol. 56, no. 4, pp. 419-452, Oc obe , 1983.
[4] Schá le, Á. “Using Ma ginal E ec i e Tax Ra es o he Analysis
o Labou Supply E ec s on he Tax Bene i Sys em in Hunga y”.
In. Eu opean Employmen S a egy – Ways o Adap abili y in he
New Membe S a es. The case o Hunga y. KOPINT – DATORG,
Budapes 2005. ISBN: 9637260056.
[5] K. A. Collins – J. B. Da ies “Measu ing e ec i e ax a es on
human capi al: Me hodology and an Applica ion o Canada”,
CESi o Wo king Pape s No. 965. 2003 June.
[6] Eu opean Commission “S uc u es o he axa ion sys em in he
EU: 1995-2001”, Economic analysis o axa ion. Doc.
TAXUD/2923/2002 – EN
h p://ec.eu opa.eu/ axa ion_cus oms/ esou ces/documen s/ axa i
on/gen_in o/economic_analysis/ ax_s uc u es/s uc u es2002.pd
[7] Eu os a “Taxa ion ends in he Eu opean Union. Da a o he
EU Membe S a es, Iceland and No way.” Eu os a S a is ical
Book, 2012. Annex B: Me hodology and explana o y no es. ISBN
978-92-79-21209-3, ISSN 1831-8789.
[8] “Ac CXVII o 1995. on Pe sonal Income Tax”. Complex,
h p://ne .jog a .hu/j /gen/hjegy_doc.cgi?docid=99500117.TV&
imeshi =1, 2013
ANNALS OF THE ORADEA UNIVERSITY
Fascicle o Managemen and Technological Enginee ing
ISSUE #1, MAY 2013, h p://www.im uo adea. o/auo. m e/
154