Hungaryʼs tax wedge, the difference between what employees take home in earnings and what it costs to employ them, reached 43% in July, falling 10 percentage points in 10 years, business daily Világgazdaság said yesterday.
The reduction has been supported by a six-year agreement between the government, employers and unions pairing payroll tax cuts with minimum wage rises, the paper noted.
The Ministry of Finance acknowledged the results of government measures to boost competitiveness that have impacted the structure of tax revenue.
"Keeping taxes on consumption at a high level has less of a negative impact on the countryʼs competitiveness than the damage caused by keeping taxes on incomes high which gives no incentive for reinvesting profits or employment," the ministry told the paper.
Hungaryʼs general VAT rate, at 27%, is the highest in the European Union.