Hungary's value-added tax (VAT) rate stands at 27%, the highest in Europe.

Recent reports indicate that this high VAT rate has led to substantial revenue for the Hungarian government, surpassing total contributions from businesses and households combined.

According to hvg.hu, the government has successfully collected nearly all expected VAT revenues, with a tax gap of merely 2.3% in 2022. This low tax gap suggests a remarkable collection efficiency compared to previous years, notably when the gap was 20% in 2013. The effective VAT rate, which accounts for reduced rates on certain goods and services, is 21.6%, marking it as the second highest in the European Union.

The government's focus on VAT collection aligns with its stated policy to avoid taxing businesses and labor directly.

Critics argue, however, that this approach effectively shifts the tax burden onto consumers, specifically impacting lower-income households more heavily.

As consumption taxes do not account for the taxpayer's ability to pay, poorer households may face a relatively greater financial strain than wealthier individuals or corporations.

The Hungarian government has emphasized that the tax system's design is intentional, seeking to promote economic activity by minimizing taxes on income and profits while maximizing consumption-based taxation.

Consequently, VAT has emerged as a vital revenue source for the state.

The article further explores how the government has achieved its high VAT collection rates and identifies years that posed risks to VAT revenue.

Additionally, it highlights concerns regarding the competitive disadvantage faced by Hungarian online retailers due to domestic tax levels.

It has been reported that reducing VAT could lower fuel prices at gas stations by 70-80 Forints per liter, presenting an ongoing debate regarding the implications of tax policies on consumer pricing and market competitiveness.