Hungary taxation system during and after soviet union - Essay Example

The government of Hungary has various industries which it can impose tax such as in textiles, food processing, chemicals, mining and motor vehicles industries. This paper discusses about the Hungary taxation system during and after Soviet Union. Also, outlines several changes that were evident in a clear and outright way. In the early 1950s, Hungary, like the other European countries embraced the soviet economic model which was introduced by Stalin. The design constituted of one sided preparations for war and emphasized on industrial self-sufficiency.

This led to centralized managed system replacing the market and the market prices. This model was not fit for Hungary as it was a country with a population of 10 million people and had an economic background that was different from the Soviet Unions. The result of this was that the one fourth of the gross national product increase was wasted by the frozen investment projects and the unsalable commodities. The impact of this was that the shortage appeared in every area. The average wage earner wage earner experienced 20 percentage declines in real wages, and there was food rationing.

The revenue also collected by the state as tax was minimal, and these made Hungary experience an economic crisis in 1953 (OECD, 27). It is apparent that the fiscal system of Hungary passed a series of stages from the centralized planning to mostly free market economy. The first stage which is classical socialism was experienced in the first two decades after the World War II. Classical Socialism was characterized by centralization of many economic variables such as income distribution, pricing, input and output mix.

At this stage, tax system was used as a rudimentary tool to capture economic surplus and the transferring of the revenue to the state. The taxes imposed at the time were a mixture of turnover taxes and taxes from the factors of production. The paying was exclusively by the firms in this socialized economy (Bernardi et