Eurostat: Hungary leads the EU in terms of tax cuts

According to Eurostat, Hungary has cut taxes on wages and salaries by the largest amount in the last decade.

This year's tax cuts also included a HUF 600 billion reduction in employer taxes, which will allow Hungary to maintain its top tax-cutting position among EU countries in 2022, Finance Minister Mihály Varga wrote in a Facebook post earlier today.

According to a chart attached to the post, Hungary's tax wedge on average wages fell by 9.5 percentage points between 2009 and 2020; meanwhile, Romania saw the next biggest decrease, at 6.1 percentage points, and Portugal saw the biggest increase, at 5.0 percentage points.

Starting January 1 of this year, people under 25 years of age in Hungary are exempt from paying the 15-percent personal income tax up to the average wage.

For under-25s, the tax relief applies not only to wages but also to such items as sick pay, commissions, self-employment income, flat-rate income and self-employment income.

The benefit is automatic: Young employees do not need to apply for it or declare it to their employer. The tax credit must be claimed by the employer already in the January salary transferred at the beginning of February, so young people's first paycheck for this year could be up to HUF 65,000 more than before.

In a social media post last week on a similar topic, László György, State Secretary of the Ministry of Innovation and Technology, noted that as a result of continuous tax cuts, the tax system will leave at least HUF 100,000 in the pockets of families this year alone.

According to Eurostat statistics, between 2009 and 2020, Hungary saw the third-largest reduction in tax deductions as a share of GDP in the European Union. While in 2009, the state withdrew 38.9 percent of GDP in taxes and contributions, in 2020 it only took 36.4 percent. This is significantly lower than the EU average of 41.3 percent in 2020.