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Hungary: top EU VAT rate funds lowest Corp tax rate

  • EU VAT
  • 18 November 2016 | Richard Asquith

Hungary: top EU VAT rate funds lowest Corp tax rate

Hungary has proposed lowering its corporate tax rate to 9%, which would be the lowest in the European Union. This investment-attracting policy is partially funded by Hungary’s VAT rate of 27% - the highest in the EU.

The Hungary’s shift in tax – from companies to consumers – reflects a global trend. Countries need to attract global job-creating businesses with low tax rates, but have to shift the burden to consumption.

International companies are also much freer to shift their taxable profits, so legal tax avoidance can reduce corporate tax revenues. Whereas consumers have limited choice but to pay the tax on their spending. However, high VAT rates can lead to a different tax evasion problem: VAT fraud, including missing trader fraud.

More countries will follow the above trend. China has completed a wholesale VAT reform to facilitate a broader tax base, and India will launch a similar plan around GST next year.

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VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which this year won International Tax Review's Tax Technology Firm of the Year. Richard qualified as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.