Economy minister: Economic growth to offset losses in payroll tax revenue

Losses in tax revenue resulting from the government’s decision to cut payroll taxes next year could be partially offset by an uptick in economic growth, Economy Minister Mihály Varga said on Thursday.

The government expects a GDP growth rate of more than 3 percent in 2017, Varga told parliament’s economic committee in his annual ministerial hearing.

Under an agreement reached last week between the government, employers and unions, minimum wages for unskilled workers will be raised by 15 percent and for skilled workers by 25 percent in 2017. In 2018 the minimum wages will be increased by a further 8 and 12 percent, respectively. In 2017 payroll taxes will be cut by 5 percent and by a further 2 percentage points the following year.

He said the macroeconomic effects of next year’s minimum wage increases would bring in an additional 180 billion forints (EUR 573m) in tax revenue, while the payroll tax cuts would translate to 410 billion forints in losses for the state budget.