Taxes Were Cut by Billions of Euros Due to the Pandemic and the 2022 Tax Cuts Are Already Announced
Tax cuts are being announced across the globe, including by Finance Minister Mihaly Varga of Hungary. He recently announced a proposal to lawmakers that would streamline and cut taxes.
He has proposed a 15 percent reduction in the payroll tax starting next July. Alongside this proposal comes the suggestion that the vocational training contribution gets rolled together with payroll taxes. This would not affect tax preferences but would create a drop in the tax on labor by two percent.
Currently, the payroll tax is set at 15 and a half percent, while the vocational training contribution is set at one and a half percent.
The Potential Impact of the Proposal
On Sole Proprietors
Varga believes the changes would save businesses upward of 690m EUR yearly. This legislation is thought to allow sole proprietors an easier time when opting for lump-sum tax forms and flat-rate forms. This creates eligibility thresholds that are 10 times what that minimum wage is annually and 50 times what the thresholds for retail are.
The proposed changes should positively impact as many as 70,000 sole proprietors, according to Varga. This is partially thanks to the lack of sectoral tax for bourses and venture capital fund managers on next year’s tax forms.
Varga also pointed out that the proposed change for sole proprietors would not negatively affect their family tax preferences. If a sole proprietor chooses a tax form that allows an exemption from personal income tax, they can still maintain their preferences in some cases. The limit would be if their exemption is less than half the annual minimum wage.
On Other Industries and Incomes
The Finance Minister later added that energy suppliers can defer losses up to five years in hopes of preserving price cuts in utilities. He proposes a cut on capital gains tax from cryptocurrencies from 30.5 percent to 15. This is hoped to generate a few billion forints revenue for the budget while reducing tax evasion.
These changes are coming at the same time as announcements to the 2022 budget are being made. The plan is to reduce the deficit to 5.9 percent for the 2022 election year, which is lower than the 7.5 percent expected from 2021.
A Refresher on the Recent Economy
The impact on the economy from the epidemic of 2020 caused a sharp increase in both public debt and the deficit. This increase was so much that the government submitted an amendment to parliament back in April to the 2021 budget.
The Hungarian Fiscal Council was tasked with advising on budget matters with the government. They agreed the previous untenable calculations would need to be adjusted. This created a need to raise the 2021 budget to 7.5 percent from the previous 2.9 percent of GDP.
Despite the changes, the budget drafts have come under fire for not proposing a large enough decrease in debt. The council proposed a 0.6 percent decrease to 79.3 percent from 79.9 percent of the GDP for the upcoming year, which is not enough to meet many demands. This is a surprising warning to the panel as the past years have proven harmonious with realistic goals to reducing state debt ratios.
Did you find this article useful?
Subscribe to our newsletter for more!