Hungary could slash employer payroll tax to 15 percent by 2022

Payroll taxes have already been cut from 27% in 2016 to 22% now, meaning that they could be effectively halved in five years time compared with 12 months ago.

Hungary could slash employer payroll taxes to 15% by 2022, according to economy minister Mihaly Varga.

His statement came after Prime Minister Viktor Orban, who faces election in spring 2018, reached an agreement with employers last year to introduce a significant hike to the minimum wage and reduce payroll tax from 27% in 2016 to 22% now.

The aim was to boost the country’s international competitiveness and stem the flow of Hungarian workers migrating to western Europe for better pay, even though wage growth has been quite high due to falling unemployment levels at a time of no inflation.

Varga told a business forum organised by the American Chamber of Commerce in Hungary that further tax cuts were possible beyond 2018 “up until 2022, when our hope is that employers’ payroll tax will fall to 15%.” He added that the government, which reined in its fiscal deficit using unorthodox measures such as raising hefty taxes on banks and energy companies, was committed to running a tight budget.

Hungary had the fourth highest tax wedge – the total employer and employee tax burden as a share of pay – among the 34 members of the Organisation for Economic Cooperation and Development in 2015. The average tax burden for a single Hungarian worker was 49%.