The Expected Effect of the Fourth Industrial Revolution on the Hungarian Tax Structure

Abstract

In our publication we examine the process of Industry 4.0, which has led to a significant transformation of production processes from the aspect of taxation. At the beginning of the paper, we offer a brief survey of the Fourth Industrial Revolution, analysing the operating mechanism of M2M (machine to machine) and IoT (Internet of things), which are based on large data and cloud-based data storage technology. After that we examine the expected future impact of these processes. The transformation process of the domestic tax system since 2010 has been characterized by the decline in the proportion of taxes on labour and the increase in the proportion of turnover-type taxes. Our most important question is how the automation of the production processes influences the transformation of the tax system. This simulation study was carried out to compare different estimation procedures. Our new numerical results revels that the automation would result almost 6% of GDP cost reduction on live labour force in 2015 on the basis of our calculation. This process is not reversible, so in the future it is necessary to reform the tax system and to increase the tax base corresponding to the reduction of the direct cost of live labour.