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Winners and Losers. An assessment of the Hungarian flat tax reform with microsimulation


  • Csaba Tóth G.

    () (PhD student, University of Debrecen)

  • Péter Virovácz

    (research fellow, Századvég Gazdaságkutató Zrt.)


In our paper, we have used a database of tax returns from 2011 to assess how the tax reform, implemented in personal income taxation between 2010 and 2013, affected the tax burden of certain social groups and what implications the reforms had on the public finances. Our research follows the principles of positive economics using a static microsimulation model. Our findings reveal that the tax reform reduced government revenues by an annual total of HUF 444 billion. 74 per cent of this amount increased the net income of childless taxpayers in the top two income deciles. Although 63 per cent of the taxpayers with three or more dependent children are winners of the tax reform, in the bottom six income deciles tax liabilities of taxpayers with three or more children have not decreased markedly. Overall, we can conclude that it was income rather than the number of children which primarily affected the tax liabilities of private persons after the implementation of the tax reform. Reducing the tax rate to 9 per cent would result in a further 44 per cent decrease of budget revenues from personal income tax, which – on the basis of the 2011 data – would mean a loss of an additional HUF 522 billion of tax revenues on an annual basis.

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  • Csaba Tóth G. & Péter Virovácz, 2013. "Winners and Losers. An assessment of the Hungarian flat tax reform with microsimulation," Public Finance Quarterly, State Audit Office of Hungary, vol. 58(4), pages 369-385.
  • Handle: RePEc:pfq:journl:v:58:y:2013:i:4:p:369-385

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    References listed on IDEAS

    1. Simonovits, András & Cseres-Gergely, Zsombor, 2011. "A személyi jövedelemadó reformjának hatása a társadalombiztosítási nyugdíjakra [The impact of personal income tax reform on public pensions]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1029-1044.
    2. Anna Ivanova & Michael Keen & Alexander Klemm, 2005. "The Russian ‘flat tax’ reform," Economic Policy, CEPR;CES;MSH, vol. 20(43), pages 397-444, July.
    3. repec:oup:ecpoli:v:20:y:2005:i:43:p:397-444 is not listed on IDEAS
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    Cited by:

    1. Muraközy, Balázs & Reizer, Balázs, 2017. "A magyar vállalati adózás heterogenitása [The heterogeneity of corporate taxation in Hungary]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1233-1264.
    2. Randall K. Filer & Jan Hanousek & Tomáš Lichard & Karine Torosyan, 2019. "‘Flattening’ tax evasion? : Evidence from the post‐communist natural experiment," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 27(1), pages 223-246, January.
    3. International Monetary Fund, 2014. "Hungary; Selected Issues," IMF Staff Country Reports 14/156, International Monetary Fund.
    4. Palotai, Dániel & Baksay, Gergely, 2017. "Válságkezelés és gazdasági reformok Magyarországon, 2010-2016 [Recession management and economic reforms in Hungary, 2010-2016]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 698-722.
    5. Gergely Baksay & Balázs Csomós, 2015. "Analysis of the Changes in the Hungarian Tax System and Social Transfers between 2010 and 2014 Using a Behavioural Microsimulation Model," Society and Economy, Akadémiai Kiadó, Hungary, vol. 37(supplemen), pages 29-64, December.
    6. D�ra Győrffy, 2015. "Austerity and growth in Central and Eastern Europe: understanding the link through contrasting crisis management in Hungary and Latvia," Post-Communist Economies, Taylor & Francis Journals, vol. 27(2), pages 129-152, June.
    7. Bruno Martorano, 2015. "Is It Possible to Adjust ‘With a Human Face’? Differences in Fiscal Consolidation Strategies between Hungary and Iceland," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 57(4), pages 623-654, December.
    8. Dóra Győrffy, 2020. "Financial Crisis Management and the Rise of Authoritarian Populism: What Makes Hungary Different from Latvia and Romania?," Europe-Asia Studies, Taylor & Francis Journals, vol. 72(5), pages 792-814, July.
    9. Bruno Martorano, 2014. "Is it possible to adjust ‘with a human face’? Differences in fiscal consolidation strategies between Hungary and Iceland," Papers inwopa719, Innocenti Working Papers.

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    More about this item


    personal income tax; microsimulation; budget; redistribution; flat tax;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution


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