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Hungary is a model country for tax cuts

Hungary implemented the second largest tax reduction in the European Union in 2018.

According to Norbert Izer, State Secretary for Tax Affairs, Hungary implemented the largest tax reduction in the European Union in 2017 and the second largest in 2018.

“Almost one percentage point reductions in 2017 and 2018 were achieved while the average public burden increased in the Union,” Izer said.

According to Eurostat, Hungary’s tax burden fell to 37.6 percent last year, after hitting 38.4 percent of GDP in 2017, which has given the country a silver medal in the “tax cut” competition between member states this year. This continuously decreasing tendency is also remarkable because while the so-called tax centralization rate decreased significantly in Hungary, it increased from 40.2 to 40.3 percent in the European Union overall.

“The result is not surprising, as tax cuts last year left 290 billion forints for families with children, households and businesses,” the State Secretary said, recalling that the VAT on the internet, fish, pork offal, and catering was reduced in 2018.

“More than 360,000 families were affected by increasing the tax deduction for two children, and even homeowners who are renting out their flats were exempt from the 14 percent healthcare contribution payment obligation,” he said, adding that “the small business tax rate dropped by one percentage point (to 13 percent). Along with expanding corporate tax discounts, the rate of social contribution tax also dropped significantly last year.”

Izer noted that in 2020 almost everyone will be affected by the tax cuts. “In addition to providing a life-long personal income tax exemption for mothers of four, the government also exempts all working pensioners.”

SMEs will not be left out next year either, as the small business tax rate will be reduced from 13 to 12 percent and the tax burden on accommodation providers will be reduced by 9 percentage points.

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