Academic journal article Journal of Economic and Social Development

Analysis of Tax Systems in Slovakia and Hungary

Academic journal article Journal of Economic and Social Development

Analysis of Tax Systems in Slovakia and Hungary

Article excerpt

1. Introduction

Taxes are an important economic, financial, social and political tool of the state. Each state uses taxes as one of the most important sources of public budgets' revenues. In the literature we can meet various definitions of tax. As Siroký says (2012, p. 28) the tax is a compulsory amount, which is predetermined by law and which puts a strain on a part of the nominal income of an economic entity. Taxes belong to the group of indirect economic management tools; they are a tool of redistribution of the created product and they significantly influence the size of the disposable income of individual subjects (Schultzová, 2011, p. 12). Application of taxes and their use is the role of tax policy in each economy. Subject to tax policy (which is very closely linked with the fiscal policy and also with the entire economic policy of the state) is the application of tax principles and measures so that taxes serve to enforce economic, social and political objectives of the state. Through taxes the state influences many microeconomic and macroeconomic variables such as unemployment, economic growth of the country, inflation, foreign investment, consumption of the population etc. (Korecko, Suhányiová, 2012, p. 20). Changes in taxes affect the behaviour and the decision making of every economic entity, whether positive or negative. Reducing the tax burden leads the business entities to an increase in economic activity, to a growth of the performance of the economy and it contributes to an increased rate of growth of the national economy. If the tax rates are decreasing, there is an increase in the after-tax disposable income, and that is what motivates them and encourages them to work, to create savings and to invest. Then, the positive result is the expanding production; there is an increase in the tax base and also an increase in the tax revenue for public budgets.

2. Analysis of the tax burden of the member states of the European Union

One of the crucial issues is the problem of the tax burden - from the macroeconomic point of view as well as from the microeconomic point of view. The tax burden reflects the extent to which the tax system (or more precisely the tax) affects the financial resources resulting from the profit of the taxpayer, based on the application of economic or fiscal policy (Schultzová, 2011, p. 23). The tax burden can be measured, respectively expressed by various macroeconomic indicators. One such indicator is the tax quota, which is expressed as a share of collected taxes on gross domestic product for the relevant tax period. To monitor the tax burden of individual EU member countries (28 Member States) the Statistical Office of the European Union - Eurostat (http://ec.europa.eu/eurostat) usually uses indicators of tax quota. In this study, the tax quota was determined as a proportion of total tax revenues (taxes and compulsory social contributions) and gross domestic product.

According to the report of the European Commission issued in June 2014 (Taxation trends in the European Union, European Commission, Brussels, 2014), the European Union is a zone with high taxes. As highlighted in Figure 1, from the three most advanced industrial centres of the world the highest tax burden in the long term perspective is in the European Union. In 2012, the total share of taxes (that is the sum of taxes and compulsory social contributions) on the weighted average of GDP was represented by 39.4% in the 28 EU Member States. It is almost 15% higher than in the U.S.A. and approximately 10% above the level of Japan.

Tax revenues and social security contributions expressed as a percentage of GDP reached a level of 38.8% in the reference year 2003 in the 28 countries that are now a part of the European Union. In the year 2012 it was 39.4%, it means that for the period 2003-2012 the average share of tax on GDP increased by 0.6%. The second most noticeable decrease of the tax burden was in Slovakia (it was -4. …

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