Amendments to take effect next year will swell middle-class pay packets, the chief whip of the ruling Fidesz party, Antal Rogán, said on Monday.
A bill submitted by National Economy Minister György Matolcsy last Friday will see the elimination of the “super-grossing” of the personal income tax base. The change will mean the government’s flagship single-key, 16 per cent income tax regime will from January be what it purports to be, but only above-average wage earners will have more money in their pockets as a result of the change.
Those who earn more than HUF 202,000 (EUR 729.05) a month, or roughly the national average, currently pay income tax on a base comprising their headline wage plus 13.5 per cent. The original super grossing of 27 per cent, equivalent to employer-side contributions, was part of an austerity package introduced by the previous government.
Opposition parties and unions, among others, have strongly criticised the government’s decision to do away with progressive taxation and the personal allowance for low-wage earners. The result has been that high-wage earners have seen significant increases in take-home pay.
Inheritance, stamp duty
The bill also calls for a reduction in inheritance tax and stamp duty for first-time buyers. However, although beneficial to the middle classes – a million wage earners by Rogán’s reckoning – the tax system will remain not entirely flat. Those earning over a million forints a month (EUR 3,609, and five times the average) will under present plans see the benefits of reduced income tax wiped out by the planned abolition of a ceiling on pension contributions.
Rogán, who is also mayor of District V and chairs Parliament’s economics committee, dismissed opposition criticism of the flat tax. He claimed that an alternative budget proposed by the green party LMP would hit the middle classes with income tax of 25 or 45 per cent. Rogán – who said the government’s plan would “strengthen this social stratum” – accused the Greens of seeking a means to relieve the financial sector of a bank tax.
Greens see red
The LMP accused Rogán of willfully misinterpreting its 196-page “alternative budget proposal”, unveiled the previous week. The party argues that its proposals would increase take-home pay for all but the highest 20 per cent of wage earners. Chief whip Benedek Jávor challenged Rogán on Tuesday to a public debate.
“Perhaps Antal Rogán is making untrue assertions about the Greens’ proposal because he did not read it with sufficient attention, or maybe he deliberately misconstrued the recommendations it contains,” the LMP said in a statement.