BUDAPEST: Hungary will cut its corporate income tax to the lowest in the European Union, reducing the levy by more than half in some cases, as prime minister Viktor Orban turns to budget steps to boost growth ahead of parliamentary elections.
The eastern European nation will use a single rate of 9 per cent next year, according to a statement published on the government website. That compares with the two current brackets of 10 per cent for profits up to 500 million Hungarian forint (€1.6 million) and 19 per cent above that.
The move will push the rate below the Republic’s 12.5 per cent, which is shared by Cyprus, to become the lowest in the EU.
Hungary is joining a global shift toward budget stimulus, as record-low central bank rates exhausting most of the room to boost growth through monetary policy.
Mr Orban, who will face elections in 2018, is seeking to accelerate economic growth from an estimated 2.1 per cent this year, the slowest pace since 2013.
“Lowering the corporate tax will boost growth, enable companies to cover the costs of much-needed wage raises and will also help investments,” said Peter Virovacz, an economist at ING Bank in Budapest. “The move poses no danger to fiscal discipline as there’s ample room in the budget to make up for the loss in revenue.”
