Gov’t to consult broadly before cutting payroll taxes

Banking

The Hungarian government is planning to consult with a broader range of partners than previously planned ahead of cutting payroll taxes, Minister for National Economy Mihály Varga said Wednesday, noting that it would be wrong to implement the cuts from January 1 without such consultations, Hungarian news agency MTI reported. 

Varga said the planned measures are aimed at strengthening the competitiveness of the Hungarian economy so that it can close the gap with the average in the Visegrád Group of countries, or the level of the Czech Republic or Slovakia, in 5-6 years. Varga said the payroll tax reduction, for which the government has not set a deadline, will be linked to pay rises. Varga said it would be wrong to decide on the payroll tax reduction without consulting social partners before implementing it from January 1 because sufficient time must be allowed for implementation. He added that even a small move could result in substantial budgetary changes as the pension insurance fund has a budget of about HUF 3,100 bln and the health insurance fund a budget of HUF 1,900 bln. The minister noted that last Friday the Ministry for National Economy submitted to Parliament a bill containing a number of changes to tax laws and other legislation that aim to reduce tax as well as bureaucracy. If the amendments are approved by Parliament, the reduction of the healthcare contribution will leave HUF 3 bln with taxpayers, while amendment of the cafeteria allowance system will leave HUF 1.5 bln with businesses next year, he said. New tax benefits for investors investing in startups will serve to improve the countryʼs competitiveness, Varga added. Varga said the government will wait for this Fridayʼs decision on Hungaryʼs credit rating by Moodyʼs Investors Service and will then make a decision on the residency bonds. Varga said chances are good that the international ratings agency will make a positive decision on Hungaryʼs investor rating. If the residency bonds are retained, their conditions must be amended, the minister said. The government has no plans to issue foreign currency bonds on international markets, although the minister did not rule out this possibility either.

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