August 4th, 2017

Head of State Audit Office urges further reduction of tax on labour

The head of the State Audit Office said the tax rate on labour should be cut further. Hungary’s tax rate on labour was reduced to under 49% last year, but is still over the rate in neighbouring countries as well as the EU average, László Domokos said in an interview. “Hungary needs to move closer to the 40% rate, which can best be achieved through reductions in personal income tax and payroll tax,” he said. He noted that the rate earlier exceeded 55%, making it the highest in the EU. The government reached an agreement with employers and unions late last year on reductions in the payroll tax paired with increases in the minimum wage.

Domokos acknowledged the government ‘s efforts to crack down on tax evasion and noted that the share of Hungary’s grey economy had fallen to 20% from over 25% . “We have to progress further down this path and make our goal to achieve the level of that of our neighbour Austria, where it’s about 12%, the lowest level in all members of the EU,” he said. He cautioned against cuts in VAT rates, explaining that a reduction of just a few percentage points could cause a shortfall of budget revenue in the hundreds of billions of forints.

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