László Domokos, the head of the State Audit Office (ÁSZ), said a reduction in the personal income tax rate from 15 percent to under 10 percent could leave households with an additional 1,000 billion forints (EUR 2.8bn), preserving the real value of incomes during a period when businesses have little room for big wage increases, in an interview published in Monday’s issue of daily Magyar Nemzet.
Weighing in on opposition politicians’ calls for basic income and a reduction in the VAT rate, Domokos said two “world views” are evident in domestic politics at present.
“According to the one approach, the present crisis is one that requires assistance to manage, that is, one just has to survive the period of the crisis and then fall back into the old routine. But this perception is wrong, because we cannot return to where we were, for example, in January,” he said.
“The other direction in Hungary’s politics – and this is the one followed by the government – is that investment is key, because a return to a period of advancement will not come by itself. I believe this view to be the right one,” he added.
Asked to flesh out his understanding of “investment”, Domokos said declining consumption during a crisis is not a matter of debate, and can only be avoided if household incomes grow. As businesses cannot be expected to raise wages by much during a time of crisis, the onus falls on the state to take “appropriate measures”, he added.
“The appropriate step now would be for the government to implement a plan that has long been on the table, applying a single-digit personal income tax as soon as possible,” he said.
Domokos said such a reduction would leave the 4.5 million legally employed Hungarians with “about 1,000 billion forints”, calculating with a 170 billion forint cost for every percentage point reduction in the PIT rate.
He said a reduction in the PIT rate would be best implemented in a single go, “as early as the start of next year”, but added that a two-step, three-percentage-point reduction in 2021 and 2022 would “also be acceptable”.
The PIT rate reduction would maintain the real value of household incomes without any further measures, he said.
Featured photo by Tamás Kovács/MTI