Assessment Of Income Distribution And A Hypothetical Flat Tax Reform In Hungary
AbstractThe paper presents evidence on the effects of taxes and benefits on household incomes in Hungary referring to the 2006 system and a hypothetical flat tax reform. For this, a microsimulation model is used, which is based on a matched sample of an income and a consumption survey and administrative tax records. The Hungarian budget receives more revenues from VAT than from PIT. This has major implications on equity, as while PIT is progressive, VAT is regressive, imposing a higher tax burden on low-income households. We highlight the importance of tax allowances. The absolute amount of total tax allowances tends to increase with income, and the share of allowances within total incomes is around 5-7% in all income groups, except the top fifth, where it declines. Targeting is thus inadequate, and it is especially so in case of child support. Family tax allowance reaches the bottom decile only to a limited extent. This is in sharp contrast with the universal child benefit, which is well targeted to the poorest. The second part explores the likely impact of the introduction of a flat tax, where VAT and PIT rates are set at 20%, and a tax free bracket for low incomes is kept. We show that a budget neutral solution would have a largely regressive effect, where 70% of the population would lose, with a minority on the top of the distribution gaining.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Spiru Haret University, Faculty of Financial Management and Accounting Craiova in its journal Journal of Applied Economic Sciences.
Volume (Year): 3 (2008)
Issue (Month): 3(5)_Fall2008 ()
Contact details of provider:
Web page: http://www2.spiruharet.ro/facultati/facultate.php?id=14
More information through EDIRC
Tax-benefit microsimulation; redistribution; flat tax reform; Hungary;
Other versions of this item:
- Lelkes, Orsolya & Benedek, Dora, 2007. "Assessment of income distribution and a hypothetical flat tax reform in Hungary," MPRA Paper 7304, University Library of Munich, Germany.
- C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Anna Ivanova & Michael Keen & Alexander Klemm, 2005.
"The Russian 'flat tax' reform,"
CEPR & CES & MSH, vol. 20(43), pages 397-444, 07.
- Orsolya Lelkes, 2002.
"Tasting Freedom: Happiness, religion and economic transition,"
case59, Centre for Analysis of Social Exclusion, LSE.
- Lelkes, Orsolya, 2006. "Tasting freedom: Happiness, religion and economic transition," Journal of Economic Behavior & Organization, Elsevier, vol. 59(2), pages 173-194, February.
- repec:ese:iserwp:2008-06 is not listed on IDEAS
- Paulus, Alari & Lelkes, Orsolya & Cok, Mitja & Kump, NataÅ¡a & Hegedus, PÃ©ter & VÃµrk, Andres & SzivÃ³s, PÃ©ter & Kralik, Silja, 2009. "Flat tax reform in Eastern Europe: a comparative analysis of alternative scenarios in Estonia, Hungary and Slovenia, using EUROMOD," EUROMOD Working Papers EM9/09, EUROMOD at the Institute for Social and Economic Research.
- Peichl, Andreas & Paulus, Alari, 2007.
"Effects of flat tax reforms in Western Europe on equity and efficiency,"
FiFo Discussion Papers - Finanzwissenschaftliche DiskussionsbeitrÃ¤ge
08-4, University of Cologne, FiFo Institute for Public Economics.
- Paulus, Alari & Peichl, Andreas, 2008. "Effects of flat tax reforms in Western Europe on equity and efficiency," EUROMOD Working Papers EM2/08, EUROMOD at the Institute for Social and Economic Research.
- Paulus, Alari & Peichl, Andreas, 2008. "Effects of Flat Tax Reforms in Western Europe on Income Distribution and Work Incentives," IZA Discussion Papers 3721, Institute for the Study of Labor (IZA).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Laura Stefanescu).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.