Tax and expenditure policies in Hungary

Western observers argue that cuts in taxes and expenditures are desirable. Optimum tax theory shows that a narrowing of the tax base provides the main case for tax reductions. Hungary"s high foreign debt and the undesirability of cutting some expenditures make cuts in other expenditures even more urgent. The paper argues for broadening the tax basis, tightening compliance, and reducing the tax element in social security contributions. (Author abstract)