Hungary Scraps Income Tax for Under-25s to Support Recovery, Family Formation

Hungary Scraps Income Tax for Under-25s to Support Recovery, Family Formation

The Hungarian government of national conservative leader Viktor has scrapped income tax for under-25s as part of its efforts to aid a post-pandemic recovery, discourage emigration, and help young people to form families.

The Hungarian parliament, where Prime Minister Orbán’s party, Fidesz, enjoys a supermajority, voted through the tax break by an overwhelming majority, and it will take effect from 2022.

Hungarian minister for families Katalin Novak declared that “The Hungarian government is the government of tax reductions,” explaining that the Central European country has “the lowest corporate tax rate in Europe”, at 9 per cent, and that “thanks to the family tax system the more children parents have the less personal income tax they need to pay, and since January 2020, women with at least four children are exempt from paying [personal income tax] forever”

In an effort to reverse Hungary’s demographic decline without recourse to mass migration, the Orbán government has introduced a raft of policies aimed at assisting people who would like to form families but feel they could not bear the cost of doing so.

Minister Novak recalled that Hungary’s “comprehensive support system at the disposal of youngsters” already includes such policies as a “baby-expecting subsidy which provides a €28,000 (£24,000/$34,000) interest-free, general-purpose loan for young couples, which they don’t need to pay back when the third child arrives” and the suspension of student debt repayments for women while they are having children, and the outright cancelling of debts for women who have at least three children.

The aforementioned lifetime exemption from personal income tax payments is intended to help women who focus on family rather than career in this way in early life to make up for lost earnings if they so choose.

“We think that in these challenging times this measure will strengthen the youth and facilitate the process of starting a family, entering the labour market, accessing to their own homes or completing their studies,” Novak concluded, adding that while the governing is “creating opportunities [for young people], it’s their choice how they use them” — a nod to the fact that there is no obligation for those who take advantage of the tax break to have children, despite an increased birth rate being one of the government’s wider policy goals.