Government to cut payroll tax 2.5 percentage points next year in Hungary

Hungary’s government plans to cut the payroll tax by 2.5 percentage points next year rather than by 2 percent in reaction to fast wage growth, Economy Minister Mihály Varga said on Thursday.

Varga noted that the government had agreed with employers and unions late last year to reduce the payroll tax by a further 2 percentage points in 2018 but would widen the cut to 2.5 percentage points if gross wage growth exceeded 11 percent in January-September.

Gross wages were up an annual 12.6 percent in July, data released by the Central Statistical Office (KSH) on Wednesday show. As we wrote, Hungarians still have one fo the lowest  salaries in Europe.

KSH will not publish January-September wage data until November 22, but the National Bank of Hungary projected the rate for the period would exceed 11 percent in a quarterly forecast released on Thursday.

The government already cut the payroll tax by 5 percentage points from 27 percent from the start of this year under the agreement reached with employers and unions.

The payroll tax reductions are being paired with big increases in the minimum wage for skilled and unskilled workers.

Varga made the announcement after a meeting of the National Competitiveness Council, a body of business leaders and experts established to make recommendations to the government.

Source: MTI