Problems arising from cascading taxation in the context of value added tax in Hungary

Abstract

The most important underlying rationale behind the construction of the EU value added tax (VAT) system was the replacement of the national cascading turnover tax systems that distorted the competition and prices for a neutral and common system in order to attain the objectives of the internal market. However, this objective has not been fully realized. The main reason for this is the persisting interference of national turnover / turnover-based business taxes with the VAT system in the context of the Hungarian tax system. The present contribution aims to demonstrate these problematic cases, with particular regard to the examination of such interference of the VAT system with national hybrid taxes and national real estate transfer taxes.