The Development History and Economic Characteristics of the Hungarian Local Tax System from the Change of the Regime until the Pandemic

Abstract

The objective of the study is to present Hungarian local tax regulations from the change of the regime, in transition term until the period of COVID-19, with special attention in the light of changes in the legal system and their economic effects. We have divided the past three decades into three periods and, within these, we have examined local taxation item by item. In addition to the period from the change of the regime and the EU accession period, as well as the interval from EU integration to the state financial reforms of 2010, the study also pays special attention to the legislative changes introduced because of the pandemic. We are looking to answer how the local tax regulations affected the revenues of local governments and what kind of tax-mix developed in the decades following the change of the regime. The main conclusion of the study is that the changes in the local tax system have been significant since 2010, as some types of tax were phased out, while new tax types with an open list appeared. The analysis of the legal dynamics of the short period following the pandemic led to the conclusion that Hungarian local governments’ room to maneuver decreased because of the measures affecting the local tax system, and the decision-making was mainly justified by the economic conditions caused by the pandemic.