At a press conference organized on the sidelines of the Regional Digital Conference in Budapest, Minister for National Economy Mihály Varga announced that Hungary’s current corporate income tax rates of 10 percent and 19 percent are set to be reduced to a flat rate of 9 percent as of next year.
Thus, Hungary’s corporate tax rate will be the lowest within the European Union, and enterprises can keep HUF 145bn more of their income, he added. The fiscal shortfall stemming from this reduction is expected to be compensated by faster economic growth already in 2017.
This proposal is to be approved by employer and employee organizations this week, after which the Ministry could submit a bill to parliament. This would enable amendments to enter into force as of 1 January 2017 and create the groundwork for lifting economic growth from the current rate of 2-3 percent per year to 3-5 percent, he stated.
In response to a question by journalists he said calculations show that the budget does not need to be amended, current fiscal reserves of HUF 200bn would cover the shortfall. The issue of reducing the corporate and personal income tax rates was raised at wage negotiations. The Government has now spotted an opportunity for concurrently improving competitiveness and meeting wage demands through cutting the corporate tax rate and enabling massive wage hikes. The main sticking point with employer organizations concerns the Government-initiated minimum wage hike of 15 percent. Opinions are closer regarding a proposal to reduce payroll taxes by 4 percentage points; the standpoints of the two sides differ only in some nuances and timing.
As a whole, Minister Varga said, he believed chances were good that negotiations could be concluded on Friday.
With regard to questions on raising the ceiling of applicability for the Fixed-Rate Tax of Small Businesses (KATA), the Minister said that the Ministry expects 50-60 thousand more enterprises to opt for this tax scheme of minimum paperwork, in addition to the current 160 thousand.
(Ministry for National Economy)
