Jan 18, 2017

Hungarian government to fight "tooth and nail" for tax reductions

Tax reductions will create the conditions for higher salaries in the private sector, to match the already evident rises seen in the public sector

The Hungarian government will fight “tooth and nail” for tax reductions, Csaba Dömötör, parliamentary state secretary at the Cabinet Office of the Prime Minister, has said.

The tax reductions will create the conditions for higher salaries in the private sector, to match the already evident rises in the public sector, meaning the comprehensive wage agreement already has its effects felt, he added.

Dömötör also pointed out that the Hungarian GDP is increasing steadily, unemployment has decreased from some 12 percent in 2010 to 4.5 percent to date, during the same period, the number of people in employment has increased by more than 700,000, and the majority of new jobs have been created in the market sector.

It are these economic achievements that made the conclusion of a comprehensive agreement on tax reductions and wage increases between employers, workers and the government possible at the end of 2016.

Meanwhile, Péter Cseresnyés, state secretary for the Labor Market and Training at the Ministry for National Economy said that real wages have increased by more than 20 percent since 2013, while in the first ten months of 2016, the dynamism of pay rises accelerated: real wages increased by 7.4 percent during this period.

Dömötör stressed that the taxes payable by employers have been reduced, the corporation tax now stands at 9 percent for all businesses, and by virtue of the fixed single-rate income tax and the available family tax benefits, there is more money left with those living off wages and salaries.

He said that they cannot rely on the opposition in the struggle to cut taxes, and reiterated that the opposition parties did not support the reduction of taxes at the parliamentary vote.

In contrast to the opposition’s policy, the government would like to see not only that everyone is employed but also that they clearly see that working is worthwhile, Dömötör said.

The state secretary at the Ministry for National Economy pointed out: last year’s wage agreement is not only about pay rises, but equally includes a major tax reduction plan for a period of six years. Taxes payable on work-related incomes will decrease by 5 percentage points in 2017, and subject to the development of wages, may decrease by further 2 percentage points in each of the coming two years.

Cseresnyés said: the increase of the minimum wage and of the guaranteed wage minimum of qualified workers as set out in the agreement concerns some 1.2 million workers on January 1,  2017, and this measure will increase the savings of families by 220 billion HUF.

In his words, they also expect the wage agreement concluded last year to have a positive impact on the higher pay categories as well: pre-tax wages will increase by 8 to 9 percent in the competitive sector in 2017, and based on the projected 1.6 percent inflation, real wages will rise by 7 percent this year. Added to this are the tax reductions implemented in other areas, such as the reduction of VAT.