To Comply or Evade? Direct Taxes, Private Entrepreneurship and the Institutionalisation of Informal Practices in Hungary, 1945–1956

Abstract

Direct taxes are often considered to have had a lesser role in the economic development of communist countries when compared to their equivalents in market economies. This article challenges this view by arguing that direct taxes were critical in influencing the socio-economic transformation of Hungary between the end of World War II and the installation of the pro-Moscow regime of János Kádár after the failed 1956 revolution. Taxes levied on private businesses conditioned individuals’ economic prospects and simultaneously gave rise to various creative practices in economic self-management. Taxation under socialism not only shaped the lives of self-employed people but also had a lasting impact on society more broadly and the communist state itself.