Template-Type: ReDIF-Article 1.0

Author-Name: Péter Gábriel
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Email: gabrielp@mnb.hu
Author-Person: pgb2

Author-Name: Lóránt Kaszab
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Email: kaszabl@mnb.hu
Author-Person: pka621

Title: Laffer Curves for Hungary

Abstract: The study uses a general equilibrium model calibrated for the Hungarian economy
to estimate the Laffer curve of the labour tax rate. According to the results, the tax
rate maximising budget revenues in the medium term is 55 per cent, while based
on the model version taking into account the accumulation of human capital and
capturing the longer-term effects of a tax cut, it is 40 per cent. The simulations
showed that the self-financing rate of the reduction of the labour tax rate from
its pre-crisis level to the level in 2011 is roughly 80 per cent over the medium term
and that it is fully self-financing in the longer run. In the case of additional tax cuts,
the self-financing rate diminishes somewhat in line with the lower tax rate at the
outset, but remains high.

Classification-JEL: E0, E13, E2, E3, E62, H0, H2, H3, H6
Keywords: Laffer curve, fiscal policy, labour tax rate, tax cut, human capital, self-financing
Pages: 55-76
Volume: 18
Issue: 4
Year: 2019
File-URL: https://en-hitelintezetiszemle.mnb.hu/letoltes/fer-18-4-st3-gabriel-kaszab.pdf
File-Format: Application/pdf
Handle: RePEc:mnb:finrev:v:18:y:2019:i:4:p:55-76