The Government is likely to initiate a further 0.5 percentage point reduction of payroll taxes as of January next year, and thus corporate taxes will be 2.5 percentage points lower in 2018, Minister for National Economy Mihály Varga said after the first autumn session of the National Competitiveness Council. The panel, comprised by representatives of the private sector and economic and scientific organizations, evaluated the economic impact of the six-year wage deal concluded in last November.
Developments in the eight months since the introduction of the initiative have confirmed our estimations and expectations, the Minister noted. Last year’s deal is a milestone, he added, as the agreement, a document requiring long-term commitment, has been signed jointly by the Government and representatives of employee and employer organizations.
Under the deal, the minimum wage and guaranteed minimum wage (for skilled workers) were raised by 15 percent and 25 percent, respectively, while payroll taxes were cut by 5 percentage points. In 2018, the minimum wage will be raised by another 8 percent and the guaranteed minimum wage by another 12 percent, while payroll taxes will be down by another 2 percentage points.
According to a clause in the agreement, the Government was to initiate another 0.5 percentage points of payroll tax reduction as of 1 January 2018 provided gross wage growth exceeded 11 percent in the first nine months of 2017.
Analysing data from the period January-August 2017 the Minister said that fiscal processes had been in line with prior expectation, state revenues had not declined. Several positive trends can be observed in the private sector and this indicates companies’ rapid adaptability, he noted. Despite wage hikes, the number of new enterprises has begun to rise since the beginning of the year.
The impact of wage hikes shows that regional differences can be narrowed and convergence can be achieved also in terms of wages, he stated, as wage growth has picked up also in the case of low added value jobs. Over the past two years, the number of people in employment has risen steadily, especially within the private sector.
(Ministry for National Economy)
