Tax and HR Committees Discuss Effects of Personal Income Tax Changes

Joint HR and Tax committee meeting

Around 40 corporate tax and HR experts joined a hybrid meeting on September 29, to discuss the effects of personal income tax reduction granted to employees under 25.

In January, Prime Minister Viktor Orbán announced that from 2022 onwards, young Hungarians under the age of 25 will not have to pay personal income tax. According to the Central Statistical Office (KSH), in next January, around 270,000 youngsters will be affected by the policy. However, new research reveals that the number is closer to half a million Hungarians. (source: Hungary Today)

Iinitiated by Deutsche Telekom, the purpose of the meeting was to have an open discussion on the challenges companies will face once the new legislation comes into effect. During the lively one-hour discussion, moderated by HR committee chair Dr. Róbert Dobay and Tax Committee chair Károly Radnai, companies opened up about their fear of losing competitiveness due to the changes. However, it is expected that in this demographic personal income tax savings will drive consumption, thus positively affecting the real economy.

Joint HR and Tax Committee Meeting

Participants of the joint committee meeting also raised that the a significant net increase in earnings for those under the age of 25 might lead to wage tension between employees, therefore leaders need to be prepared to communicate these changes within the organization to ease such tension. The prospect of higher net wages - after reaching the age 25 – will be more realistic if seeking out new employment, therefore could incite job-hopping in fast-moving sectors, such as the Business Services Sector.

Moreover, HR professionals agreed that wages alone are not a sustainable retention tool, employee engagement needs to be a core focus area, especially in the post-Covid era, when face-to-face time with management has decreased dramatically.

The discussion will continue in the future on similar topics affecting both taxation and human relations areas.