NISPAcee Annual Conference
 
Paper Details
V. Working Group on Public Sector Finance and Accounting
Author(s)  Mihaly Lados 
  Centre for Economic and Regional Studies, Hungarian Academy of Sciences
Gyor  Hungary
 
 
Paper Name  Property taxation in Hungary: Time to change
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Paper Abstract  
  
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 Preliminary Abstract
In all CEE and CIS countries where the transformation of the planning economy has phased some rates of decentralisation of the state, the improvement of local fiscal ca-pacity has become an emerging issue. A good signal of emerging fiscal decentralisa-tion is the taxation right of localities. Tax on immobile property is the most widely utilised local government revenue across the Anglo-Saxon World including the coun-tries of the Commonwealth. Nothing surprise on that World Bank, OECD and the dif-ferent aid programs’ (US Aid, Canadian Aid, British Know-how Fund) studies has proposed to develop an ad valorem property tax system as a fundamental basis of lo-cal revenues all over the world including Hungary over the period of the last 15 years. The main goal of this research is to examine critically property tax as a system of tra-dition of taxation, a type of local revenue and the procedure of taxation (tax admini-stration) in the context of fiscal decentralisation in Hungary.
The structure of the paper is based on the research protocol of the Working Group. The introduction clearly set out the goals, aims and objectives of the research includ-ing research questions and the list of expected outcomes. The next chapter presents the institutional framework of Hungary and describes the government structure and the intergovernmental fiscal relations and the structure of local revenues.
In Hungary, as same as in most country, the taxation on immobile property is not a completely new phenomena. It has some tradition, possible before the Communist period or even under the Communist period. If it so, what form(s) of property tax ex-isted in the past? What are the major milestones in the evolution of property taxation in the country? These questions are discussed in third chapter.
Going deeper into the core topic, the next chapter gives an overview of property tax as local revenue in Hungary. First property tax is described in the frame of the national tax system. The second dimension of this picture is looking at property tax as part of the national and local revenue system. The core of this chapter is the tax incidence analysis of Hungarian property tax system comparing with tax on local industry.
An effective tax system requires a well designed and implemented tax procedure and tax administration: Regarding property tax the items which are discussed in the fifth chapter are the following: identification, classification, valuation, assessment, rating, collection, enforcement, appeals procedures.
The next chapter provides a case study of property taxation due to the practice of a Hungarian municipality. The paper will discuss not only the structure and administra-tion of local tax system including property tax but it try to identify local taxation atti-tude. How a particular local government applies the freedom of taxation right: choice of the type of tax, the rate setting and exemptions.
The last chapter sums up all the major issues has raised in the paper and provides a critical analysis regarding property taxation in the framework of fiscal decentralisation and the local political environment. Paper discusses the major debates and policy recommendations related to property taxation in the last 3-5 years. It emphasises that what is the role of the Parliament and Central Government to improve local property tax system, and also defines what LGs must and/or able to develop regarding this issue (proposed changes).