Research initiated and funded by the ERSTE
Stiftung to assess the impact of the
percentage tax designation on civil society
based on experience from Hungary,
Lithuania, Poland, Slovakia and Romania
International Conference
Percentage Tax Designations: Past, Present, Future
Hungarian experience with the percentage mechanism
by István Sebestény Phd
Bratislava, Slovakia
September 8–9, 2016
CIVITALIS
EGYESÜLET · ASSOCIATION
BUDAPEST
• „When the germ of the 1% idea appeared in 1991, it emerged as
part of the parliamentary debate on how to finance the churches, the
liberal party suggested that taxpayers should be authorized to
transfer 1 percent of their personal income tax either to churches or
to voluntary organizations. The intention behind the motion was to
reform the system of financing churches and not to create an
additional source of support for NPOs. Finally the law adopted in
1996 identified only the social organizations as potential
beneficiaries. In 1997, it was amended by Law CXXIX/1997, which
provided that, upon the taxpayers’ decision, another – so called
“second” – 1% of the personal income tax could be transferred to
the churches.”
(1%, 2000)
Origins of the 1% idea
The new method of supporting civil
society organizations was born almost
accidentally.
The original objective: a solution for
church funding
Initiators: politicians and government
officials
No organized civil lobby, only some expert
influence in the first phase
The most important laws
referring to 1 percent system
• 1996 – 1% law
• 1997 – law on „second” 1% to churches
• 2007 – amendment 1% law
(technical changes)
• 2011 – a comprehensive law on civil sector
(Civil Act)
• 2013 – amendment of 1%
(registration, anonymity)
Eligibility
• A long list of fields of activity
(until 2014 no list of eligible organizations)
• Having been in existence for some years
• Independence from political parties
• Not in arrears with tax and duties
• From 2015 to be registered at tax office
Procedure
• The 1% designation is part of the tax declaration
• The taxpayers are allowed to designate only one
beneficiary
• Obligatory elements of the designation
declaration: tax identity number and name of the
taxpayer, tax identity number of the recipient
organization
• Designators are unknown for the organizations
(until 2015 except his/her approval – potential
future donors ?)
”What are we talking about?”
In 1997:
8,400 organizations received 1 percent,
1,058 designations,
7 million €;
In 2014:
24,000 organizations received 1 percent,
1,931 designations,
22 million €;
In 2015:
25,000 organizations received 1 percent,
2,055 designations,
26 million €;
In 2016:
27,000 organizations registered at NTCA
Figure 1
First impact of the introduction of the 1% system
15000
6474
Supported only
from 1%
designation
1910
Supported from
both state
budget and 1%
10000
5000
6788
6054
1996
1997
0
Supported only
from the state
budget
Figure 2
Redistribution impact
34
1% support
50
16
Other state
support
95
4
0%
Small NPOs
20%
40%
60%
Medium-size NPOs
80%
100%
Large NPOs
Figure 3
Changes of 1+1% designations in Hungary, 2005–2014
4 000 000
3 000 000
2 000 000
1 000 000
0
2005
2006
Civil 1% designations
Sources: NTCA
2007
2008
2009
"Second" 1% designations
2010
2011
2012
Number of taxpayers
2013
2014
Number of designators
Figure 4
Distribution of designators by their designation in Hungary, 2005–2014
2 500 000
2 000 000
Only "second" 1%
1 500 000
Both 1%
1 000 000
Only civil 1%
500 000
0
2005
Sources: NTCA
2006
2007
2008
2009
2010
2011
2012
2013
2014
Figure 5
Composition of possible sum of civil 1%, 2005–2014
35
28
23
26
2015
Sources: NTCA
Figure 6
Changes in the distribution of the 1% support by field of activity of recipients,
1997, 2006, 2014, 2015
Source: NTCA and HCSO
Figure 7
Composition of designations, beneficiaries and the amount of 1% support
received by field of activity, 2015
Source: NTCA
Figure 8
Composition of designations, beneficiaries and the amount of 1% support
received by type of organizations, 2015
Source: NTCA
Figure 9
Number of recipients by percentage of 1% inside their total income, 2014
3 106
1 614
213
94
%
Source: HCSO
59
Figure 10
Composition of amount of 1% received, all state support and total income
by type of community, 2014
Source: HCSO
Figure 11
Number of NGOs that received 1% designations and/or private
donations, 1996-2014
Source: HCSO
Figure 12
Breakdown of NGOs by receipt of 1% designations and/or private donations in 2014
1% designations only
23%
Neither 1%
designations nor
private donations
47%
1% designations and
private donations
18%
Private donations only
12%
Source: HCSO
Figure 13
Growth of 1% designations, individual donations in Hungary, 1996–2014
Sources: HCSO
„Constant” challenges I.
The objective: Convincing the rest of
taxpayers that they should designate a 1%
recipient
The „situation”: lower tax rate*, less 1%
As a preparation:
• Finding out why almost half of the taxpayers
are not willing to do so – serious and
sophisticated research is needed
• Developing a strategy of sector-wide efforts
* From 2011 transformation of the dual-key system into flat tax
„Constant” challenges II.
Raising public awareness of the 1% system
through direct actions and campaigns
Involving local governments in promoting 1%
Developing coherent fund raising and 1%
strategy
Improving accountability, trustworthiness, and
legitimacy among possible recipients
Possibilities
Analyze the „subsector” of registered
organizations and the recipients
Mapping and analyze the hidden and the
open designators
Processing the available data on tax
designation (i.e. number and demographic
composition of designators, attitudes etc.)
Make use of the 20th anniversary of 1% law
(conferences, impact analysis etc.)
CIVITALIS
EGYESÜLET · ASSOCIATION
BUDAPEST
Thank you for your attention!