Attilane Ambrus

University of West Hungary

ambrusne@ktk.nyme.hu

The Advantages and Backdraws of the Flat-rate Personal Income Tax

Abstract: It is not an easy task for governments fighting with economic and socio-political issues to establish a suitable tax system. International and national economists argue for and against the introduction of the flat- rate personal income tax. As the practical implementation of the flat-rate tax system and the experience related to it are not uniform, it is rather difficult to generalise. My aim is to analyse what underpins most often heard pros and cons by describing the practice in some of the neighbouring countries. After that I give an overview of the relationships that further the application of the flat-rate personal income tax in Hungary. I also take some factors into consideration on the basis of which certain amendments to laws are difficult to justify. I will describe the process of how the national linear (flat-rate) personal income tax system was established, as well as, how tax revenues may be affected by amendments to laws.

Keywords: flat-rate, personal income tax, tax burden, tax revenues, simplification.

JEL Classification: H24.