Hungary drops income tax for citizens under 25 to stop youth emigration

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Taking a leaf from its Polish allies’ economic policy, Hungary’s ruling conservatives plan to exempt under-25s from paying income tax, Prime Minister Viktor Orbán announced on Friday.

“We have decided on this tax reduction because it will strengthen cooperation between people, while the tax increases preferred by the left is choking [economic] performance,” Orbán said Friday morning in his regular weekly interview on national station Kossuth Rádió.

Poland’s ruling Law and Justice party (PiS) introduced income tax exemption for under-26 employees earning less than 85,528 zlotys on Aug. 1, 2019.

Analyzing the economic and social impact of the measure, Finance Minister Mihály Varga said on Sunday on news television HírTV’s Bayer Show that the main motivator was demographic.

“The most important issue for the country is still demography, encouraging, helping and supporting childbearing,” Varga said. “As a result, we have long been looking at the question of how to give as much support as possible to the younger generation, whether for a job, for studying, home-building or employment, as much depends fundamentally on how many children will be born in this country in a year.”

“After a thorough analysis, we believe that we have an opportunity to give [them] a tax break similar to the full income tax exemption of mothers with four or more children,” Varga said. Commenting on the opposition’s criticism of the planned measure, he added that the tax exemption — limited to the average income in Hungary — is a decision that will impact the lives of some 280,000.

“When the left-wing media raises its voice in the name of groups of a few dozen people, I am quite surprised that they would dismiss several hundred thousand people with a wave of the hand,” Varga said. “This is a very important generation, and they are in the life stage when such a support could be quite welcome.”

He said that while the measure is expected to cost the budget about HUF 100 billion (€277 million) in lost tax revenue, the social impact is a much more pertinent consideration.

“I say again, tax revenue is a small aspect of this, an important aspect of course, but only a small aspect, since the long-term goal is for a young person to feel connected to their own country, find their place here, in this economy, and hopefully have children.”

Title image: Hungarian Finance Minister Mihály Varga (L) on the Bayer Show on January 17, 2021. (source: Facebook)


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