Hungarian employers press to bring forward timing of payroll tax cuts

Bringing forward the timing of gradual payroll tax cuts to coincide with the calendar year is among issues under discussion at talks between employers, unions and representatives of the government, daily Magyar Nemzet said on Thursday.

Employers have long pressed for the payroll tax reductions – outlined in an agreement reached in 2016 – to take effect from the start of the calendar year rather than mid-year, the paper said.

The deal the government sealed with employers and unions late in 2016 links the payroll tax cuts to wage rises.

It outlined reductions in the tax from 27 percent in 2016 to 22 percent in 2017 and 19.5 percent in 2018.

At the same time, the minimum wages for skilled and unskilled labourers were raised in the double digits.

From 2019, the agreement stipulates that the payroll tax will be reduced a further four times by two percentage points on each occasion. The cuts are timed from the start of the second quarter of each calendar year as long as the gross average private sector wage rises at least 6 percent year-on-year in the first quarter of the given year.

This year, lawmakers voted to cut the payroll tax by two percentage points to 17.5 percent effective July 1.

Private sector wages rose 11.8 percent year-on-year in Q1 2019. The increase was supported by an 8 percent minimum wage rise as well as by a labour shortage.

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Source: mti