Hungarian government: Middle class to strengthen through wage increase

Budapest, January 2 (MTI) – Wage increases will help strengthen the middle class and Hungary’s economy as a whole in the long term, state secretary Csaba Dömötör said on Monday.

The economy has been on a path of growth for several years and projections show that the growth rate could reach 4 percent taking into account European Union tenders, he told public news channel M1. This is a guarantee for the government’s wage increase and tax cut scheme to continue, he added.

Dömötör cited the cut in the corporate tax rate to 9 percent and the reduction in employer contributions by 5 percentage points as examples of the government’s 2017 efforts to boost the economy. As a result, companies will find it easier to generate funds for paying higher wages, he added. The VAT on internet services has dropped from 27 percent to 18 percent and the VAT on some basic food stuffs, including milk, poultry and eggs, has dropped to 5 percent, he noted.

The green opposition LMP said the middle class in Hungary was shrinking and masses of people were falling into poverty. Group leader Erzsébet Schmuck accused the government of neglecting large groups of society that represent the nation. When the Fidesz-Christian Democrats entered government, they decided to establish their “own national bourgeoisie”, an economic elite, and they channeled some considerable income from lower layers of society to these groups. The introduction of the single-rate personal income tax regime put 500 billion forints (EUR 1.6bn) into the pockets of the top 10 percent while withdrawing hundreds of billions from low earners and blocking pensioners from the benefits of economic growth, she told a press conference.

The Socialist Party accused the government of “deceiving” consumers saying that the drop in the VAT rate of basic food stuffs would only reduce prices “for a few weeks”, after which they would go up again. The party said income poverty had risen by 50 percent since the Fidesz party took power in 2010, adding that Hungary had become the second poorest country in Europe during this time. The party vowed to introduce a net minimum wage of at least 100,000 forints, reinstate the earlier pension scheme and reduce payroll taxes if it came into power. It also pledged to cut utility prices and the VAT rate of basic food stuffs.

Source: MTI