Hungary to continue payroll tax cuts – if wages rise fast enough Hungary to continue payroll tax cuts – if wages rise fast enough

Hungary to continue payroll tax cuts – if wages rise fast enough
09 Jul 2018

Hungarian finance minister Mihály Varga has pledged to continue reducing the payroll tax in 2019 if wages rise fast enough.

The announcement could see the 19.5% payroll tax cut by another two percentage points next year, the Budapest Business Journal reported.

In a 2016 deal with employers and unions, the Government committed to payroll tax reductions conditional on wage increases. As a result, the tax was cut from 27% to 22% in 2017 and again to 19.5% in 2018, with minimum wages for both skilled and unskilled labourers raised at the same time.

Under the agreement, the payroll tax will fall four more times from next year, by two percentage points each time. The cuts will take place at the start of the second quarter of each calendar year, as long as the gross average private sector wage rises by at least 6% year-on-year during the previous quarter. An explanatory memorandum for the 2019 budget bill says the next payroll tax cut is expected to take place from 1 July.

Real wages were up a little more than 10% in the year to April, according to the latest data from the Central Statistical Office (KSH).

Presenting the 2019 budget bill in Parliament, Varga also said the government hoped to raise the threshold for tax deductions on the profit companies put into reserves and earmark for investments from HUF 500 million (US$1.77 million) to HUF 10 billion (US$35.4 million) a year.

 Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

Hungarian finance minister Mihály Varga has pledged to continue reducing the payroll tax in 2019 if wages rise fast enough.

The announcement could see the 19.5% payroll tax cut by another two percentage points next year, the Budapest Business Journal reported.

In a 2016 deal with employers and unions, the Government committed to payroll tax reductions conditional on wage increases. As a result, the tax was cut from 27% to 22% in 2017 and again to 19.5% in 2018, with minimum wages for both skilled and unskilled labourers raised at the same time.

Under the agreement, the payroll tax will fall four more times from next year, by two percentage points each time. The cuts will take place at the start of the second quarter of each calendar year, as long as the gross average private sector wage rises by at least 6% year-on-year during the previous quarter. An explanatory memorandum for the 2019 budget bill says the next payroll tax cut is expected to take place from 1 July.

Real wages were up a little more than 10% in the year to April, according to the latest data from the Central Statistical Office (KSH).

Presenting the 2019 budget bill in Parliament, Varga also said the government hoped to raise the threshold for tax deductions on the profit companies put into reserves and earmark for investments from HUF 500 million (US$1.77 million) to HUF 10 billion (US$35.4 million) a year.

 Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

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