In 2010, Prime Minister Orbán’s government entered office with a promise to restructure Hungary’s former, post-Soviet taxation system. Under the pre-2010 tax policy, employment and wage increases imposed a disproportionately heavy financial burden on employers – and this posed serious obstacles to Hungary becoming a competitive, workfare society.
Last year, the government reduced corporate taxes from the already low level of 10 to 19 percent, which it introduced soon after election in 2010, to a flat nine percent, the lowest corporate tax in Europe. As a result, unemployment is falling and wages are rising. The Hungarian gross monthly wage now tops 1,000 EUR and unemployment stands at a record-low 3.8 percent.
Meanwhile, personal income taxes in Hungary have dropped from 18 and 36 percent to a flat 15 percent between 2009 and 2016. VAT on certain basic staples such as bread, milk and pork were reduced from 18 to five percent, while VAT on internet, construction services and restaurant meals have also fallen to five percent.
In addition, more than 10 billion EUR has been given to families since 2010 in the form of family support, tax preferences and lower tax rates for newly married couples. The government has made support to families a priority.
These measures serve a clear purpose: to create jobs and keep more money in the pockets of Hungarian workers.