The Deputy State Secretary added that the flat-rate personal income tax system has been an evident success; the introduction of flat-rate tax has significantly contributed to economic growth, the improvement in unemployment and it had a positive impact on demographic trends.

Zoltán Pankucsi pointed out that the reform plan formulated by the Hungarian Government had aimed to reward work and families through the overhaul of the personal income taxation system.

By the introduction of the family-friendly, flat-rate, moderate 16 percent personal income tax the Government has laid the foundation for a proportionate and just burden-sharing structure. Thus, Hungary has taken a path that differs from those of other European countries as several EU member states have over the past years raised personal income tax rates. Portugal, Spain, Ireland, Latvia and Greece have adopted this IMF policy.

Before 2011, there was a progressive personal income tax system in Hungary. This structure overtaxed extra work and therefore made taxpayers hide their incomes. In order words, the former system punished the economic achievements of taxpayers. However, the Government has done away with the former structure and eliminated high personal income tax rates.

Without the new system, the country would not have stood a chance in recovering from a severe unemployment situation, economic slump and demographic crisis. Over the past years, families with children and working parents have significantly gained through the taxation reform and the unprecedented tax cuts. The first dual effect of the introduction of the flat-rate personal income tax and family allowance systems was extra income at employees totalling HUF 500bn. In 2014, this figure rose to HUF 600bn and in 2015 it is expected to increase to HUF 660bn.

Source: Ministry for National Economy