Last week, the Hungarian government announced an economic package which, on the surface, is meant to deal with the country’s acutely low wages. Its results, however, will not increase the prosperity of the average citizen but greatly benefit large businesses.
According to the new package, the minimum wage will be increased by 15 % in 2017 and an additional 8 % in 2018. On the other hand, there will be a change in corporate tax — at the moment, it is 10 % for small and medium-sized enterprises (SMEs) and 19 % for big corporations — which will be lowered to a flat 9 % as of January 1, 2017.
Furthermore, in the next two years, the social contribution paid by employers will also be decreased by 7 percent.
So, while the government increases the minimum wage moderately (the net value of which will still be lower than the regional average due to the excessive income taxation), it gives a significant tax break to big corporations.
The government’s populist justification of this: due to massive cuts in corporate tax, firms will increase the salaries of their employees. We know that the chance for this is close to zero; higher corporate profit does not automatically mean higher wages.
If Orbán truly wanted to achieve higher wages, he should have cut the tax burdens on normal employees, and not the ones on corporate gain. Additionally, if he really intended to relieve the majority of employers, he should have favoured SMEs and not big business.
The proposed measure will reduce the national budget by 300 billion forint (approx. 1 billion euros). This is double the amount spent on higher education in one year. It will costs each and every Hungarian citizen almost 100 euro a year. Should this sum be been given to multinational corporations and Hungarian oligarchs?
The chances are that the government agencies, which help the poor and develop disadvantaged regions, will pay the price. The money will be missing from the education system, the health service, and the housing programs.
In other words, the money will be misplaced from the programs that guarantee a degree of social security for the Hungarian people.
With this measure the government becomes an exemplary pupil of the crumbling neo-liberal consensus and continues the worst traditions of the post-socialist Hungarian economic governance, which transferred large chunks of the national assets into the pockets of big business in the hope of future investment.
What the government fails to achieve, however, is strengthening the backbone of the Hungarian economy by investing in the people, helping SMEs, and redistributing material wealth in a fair manner.
With this move, Orbán is virtually turning Hungary into a Central European tax haven to bribe multinationals and increase the profits of affiliated “national capitalists”, in order to secure his own power.
The article was originally published on PoliticalCritique.org.