Change of government and economic prospects in Hungary – what can we expect in tax policy?

Political changes always attract increased attention among economic actors, especially when a change of government shows new directions. In Hungary, we are now at the beginning of such a period: there are still many question marks, concrete measures are still being formed, but at the same time, possible changes are already outlined.

The first market feedback

One of the most important issues in the field of taxation for both people and businesses is predictability. The initial communication of a new government also plays a key role in how well investor confidence is preserved. So far, the market has generally positive expectations for the change: the value of the Hungarian forint has strengthened, which indicates that some investors expect a more favourable and predictable economic policy direction.

If economic policy stances are indeed moving in the direction of stability and predictability, for example by maintaining a balanced fiscal policy or strengthening the relationship with the EU, this process of confidence can be further strengthened.

Tax policy: fine-tuning or structural restructuring?

In connection with the restructuring of the tax system, some of the promises already made in the campaign may be implemented in the first round:

• These could include the introduction of a 9% personal income tax rate on the minimum wage, and the reduction of the personal income tax rate for those earning below the median wage
• Wealth taxation may be on the agenda in some form
• Healthy foods and medicines – a reduced VAT rate may be introduced

In the medium term, the simplification of the tax system, the reduction of administration, and the rearrangement of taxes on labour may be raised. The attitude of the new government to sectoral special taxes is questionable.

In the longer term, the introduction of the euro is expected to be a goal, which would bring about a significant change in the functioning of the economy. The single currency can reduce exchange rate risk, create a more predictable environment for businesses and strengthen investor confidence. At the same time, the introduction is subject to strict conditions and requires thorough economic preparation, so it is more of an opportunity that can be interpreted in a multi-year perspective.

The application of KATA taxation in a form different from the current one may be a demand expressed by a wide range of society, and steps are expected in the next cycle, which changes can be welcomed by a wide range of sole proprietors.

Based on current expectations, a cautious, predictable transition is taking shape in the field of taxation.

Conclusion

The change of government naturally brings uncertainty, but it also provides an opportunity to transform economic policy, including the tax system. The first market feedback gives reason for cautious optimism. The next few months will be crucial, and until then, it is worth keeping a calm eye on developments.

If specific tax changes are made, we will try to process the changes as soon as possible and inform you about them in detail on our website and, of course, also in the form of a newsletter.