Hungary’s Economy Minister Mihaly Varga said on November 3 the government is planning to average payroll taxes to levels in the neighbouring Slovakia and Czech Republic in five to six years in order to boost competitiveness.
As reported by the Reuters news agency, Varga did not give a number for the cut the government was considering. Comparisons based on figures from the Organisation for Economic Co-operation and Development (OECD) suggested a reduction of about 7%.
Years of emigration to Western Europe have created labour shortages in countries on the European Union’s eastern flank like Hungary, Poland and the Czech Republic, which make it tough for businesses of all kinds to recruit.
Hungary has the fourth-highest tax wedge – the total employer and employee tax burden as a share of pay – among the 34 member countries of the OECD.
Last year, the tax wedge for the average unmarried worker in Hungary was 49% compared with a 36% OECD average. The comparable tax levels were 41% in Slovakia and 43% in the Czech Republic based on OECD figures last year.
“The objective of the Hungarian government is that the reduction in taxes should reach at least the average of neighbouring countries,” Varga told a news conference.