Hungary suffers from the transfer of assets to low-tax jurisdictions

The State of Tax Justice 2023 study highlights that while Hungary offers a low nominal corporate tax rate of 9 percent, it still faces the challenge of aggressive tax planning and tax evasion by companies and wealthy individuals.

According to the report, Hungary receives about $1,137 million from companies that redirect their income from other countries due to the low tax rate. However, the profits withdrawn from the country are much higher – approximately 3502 million US dollars. This results in significant annual tax losses for the country. Globally, tax evasion in Hungary accounts for only 0.1 percent of the total tax losses caused by the activities of multinational companies.

The report also identifies offshore assets of Hungarian citizens, which are financial assets such as bank accounts, investments and real estate located in foreign jurisdictions with a favorable tax base. According to the study, the total value of offshore assets of Hungarian citizens is 7.7 billion US dollars (about 2,765 billion HUF), which is 4.7 percent of the country’s gross domestic product. This is particularly worrisome, as assets moved abroad account for a significant proportion of the country’s economic performance. If these offshore assets were taxed in Hungary, the government could receive additional tax revenue of about US$57.5 million annually.

The total global annual tax loss due to the use of tax havens is estimated at US$472 billion, highlighting the need for more effective measures to combat tax evasion worldwide.