Hungary can reduce personal income tax
/Hungarian Finance Minister Mihai Varga made a statement on a possible reduction in personal income tax. According to experts, given the scale of the potential decline, this could lead to the loss of 1 trillion Hungarian forints (3.3 billion dollars) from the state budget.
Due to the expected slowdown in the Hungarian economy in 2020, it may be possible to reduce the personal income tax rate (PIT) after 2020, Hungarian Finance Minister Mihai Varga said. The idea of reducing the personal income tax rate is not new in itself - Prime Minister Viktor Orban several times over the past five years has talked about a possible reduction in the personal income tax rate to "a single number" when appropriate conditions arise for this.
In an interview with Magyar Nemzet, the vice president of the Hungarian Accountants Association, noted, that the maximum effect for the economy can be achieved if you immediately reduce the personal income tax rate from the current 15% to below 10%. Zsolt Rusin said: “This change will simultaneously help to create jobs, attract investors to Hungary and reduce the share of the shadow economy.” Currently, nearly a quarter of a million Hungarian citizens receive their salaries in envelopes, having been formally formalized at the minimum wage. "A significant reduction in the personal income tax rate in combination with the targeted actions of the tax authorities will clear the "gray zone", which will mean immediate tax revenues (to the state budget)," the expert added. According to him, even in this government cycle, the personal income tax rate can be reduced from 15% to below 10%.
Peter Honek, head of the PwC Magyarország personal income tax advisory group, believes that if the government lowers the personal income tax rate to 9%, the average income of a Hungarian citizen will increase by 22 thousand forints per month. Peter Honeck also pointed out that low-income workers in Hungary bear a higher tax burden than citizens of other countries of the Visegrad Four or some Western European countries, so such a step (reduction of personal income tax) may be justified. The expert added that, based on data for the current year, a reduction in the personal income tax rate by one percentage point will cost the state budget 175 billion forints. Thus, reducing the rate immediately from 15% to 9% will lead to a loss of 1 trillion forints of state budget revenues for the year. Peter Honek stated that in this case, the authorities will have to either reduce government spending or raise other taxes.
Adam Ficher, legal partner at Niveus Consulting Group, says that the low personal income tax rate is extremely attractive for foreign investors who, along with other factors, take into account the entire tax burden on wages, that is, what and how many taxes, payments and contributions are paid from every 100 thousand forints of net salary. In this regard, it does not matter for employers which tax will be reduced by the government - personal income tax or social tax. Adam Ficher noted that the tax burden on wages has decreased significantly in Hungary over the past few years, the reduction in personal income tax will further improve the situation and motivates investors to create new jobs. As a result, a reduction in personal income tax will increase the attractiveness of Hungary in the context of international tax competition. Currently, Slovakia and Romania are the most competitive with respect to taxes levied, where, like in Hungary, a flat tax scale is used.
