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Orbán announces biggest tax cuts in Europe's history!
Prime Minister Orbán signed an economic policy agreement in Budapest to promote growth and stability in Hungary.
Orbán announces biggest tax cuts in Europe's history!
On Friday, Prime Minister Viktor Orbán signed a strategic agreement with the Hungarian Chamber of Commerce and Industry (MKIK) in Budapest. On this occasion, he highlighted the stability and predictability of Hungarian economic policy over the last 15 years. Orbán also emphasized the fundamental importance of strong entrepreneurship as a cornerstone of successful economic policy. The MKIK received praise for its crucial contribution to stability, particularly under the leadership of László Parragh.
Orbán pointed out that the government has kept important commitments that contribute to economic relief. These include income tax exemption for young employees up to the age of 25, the reduction in social security contributions as well as making it easier to set up a company and reforming dual training.
Government criticism and tax reduction programs
The Prime Minister sharply criticized the EU Commission, which he blamed for its demands for environmental taxes, shared loans and over-regulation. Orbán warned of possible tax increases and new types of taxes that could be introduced under a hypothetical opposition, recalling the Socialists' failed attempts to introduce wealth taxes and real estate taxes. He described the left's economic policy as hostile to entrepreneurs.
Since 2010, the Hungarian government has halved social security contributions, income tax and corporate tax. The successes are clear: the average wage has tripled and the minimum wage has quadrupled. Orbán emphasized the importance of work over social benefits and announced Europe's "biggest tax cut program." Companies will be supported through various programs such as the Széchenyi card and the Sándor Demján program.
The new agreement between the government and the MKIK aims to simplify the tax system, reduce bureaucracy and develop a knowledge-based economy by 2030. In the future, companies will have digital access to data and paper work will be replaced by artificial intelligence. There are also plans to create higher allowances for sales tax and to improve the conditions for the KIVA flat-rate tax.
The National Tax and Customs Authority (NAV) plans to introduce automatic tax returns for small businesses.
Economic challenges and government measures
The action program includes 21 individual measures, including requirements for minimum wage development as well as higher tax credits for families and an interest rate cap for housing loans. The statutory minimum wage is to increase by a total of up to 36 percent over a three-year plan. Around 10 billion euros are planned for implementation in 2025 to stimulate private consumption, increase competitiveness and support the construction industry.
The economic prospects show that overall economic growth of between 3 and 6 percent is expected for 2025 and 2026. However, overall economic growth is falling well short of expectations, especially given the European Commission's lowered forecasts for 2024 and 2025. However, private consumer spending has increased, reflecting higher real wages and more stable consumer prices.
Nevertheless, the budget situation remains tense because billions of euros in EU funding have been frozen and Finance Minister Mihály Varga will become the new head of the National Bank in March 2025. The service sector is currently contributing to the economic recovery, while manufacturing, agriculture and the construction industry are shrinking.
Analyzes show that industrial production fell by 6.6 percent in the third quarter of 2024, with serious impacts on the automotive industry and battery production. At the same time, Asian investors are pushing into the Hungarian market, while the mood among German companies remains cautious. Exports to Germany, Hungary's most important trading partner, are showing declines, further highlighting the challenges facing the Hungarian economy. Despite these difficulties, there is also positive feedback from the industry as German car manufacturers are moving production lines to Hungary.
Overall, the Hungarian economy remains faced with many challenges, but sees itself moving in a more positive direction through political efforts and strategic agreements. The next steps will be crucial to achieve the desired success.