Premier Orbán Proffers Massive Tax Refund as Election Campaign Intensifies

Hungarian Prime Minister Viktor Orbán put forward USD2 billion in income tax refunds for families as the government gears up its campaign ahead of next year’s general elections. Polls suggest that Orbán’s cabinet faces a competitive race for the first time in a decade in the 2022 vote.

Millions of Hungarian parents will receive partial refunds of their 2021 personal income tax payments early next year at a total cost of HUF 600 billion (USD 2 billion) to the central budget, Prime Minister Viktor Orbán said at the opening of parliament’s autumn session on Monday. The announcement comes as Orbán’s Fidesz party is stepping up its political campaign ahead of general elections scheduled for spring 2022.

Spending spree
In his speech, Orbán noted that the government plans to increase the minimum wage to HUF 200,000 from HUF 167,400 currently, adding that talks with employers were under way and that there was a "high chance" of an agreement. In addition, pensioners will receive a pension premium to offset the impact of higher inflation.
"The tax authority will refund a total of HUF 600 billion forints ($2 billion) to 1.9 million parents," Orban told parliament. The policy mirrors the move of Poland’s nationalist Law and Justice (PiS) party. The PiS is giving Polish families PLN 500 per month after each child and exempted most people aged under 26 from the obligation to pay income tax.
The government in Budapest will issue the tax refund to all families next February, with re-payments capped at the level of income tax paid by someone earning the average wage.
Orbán has already unveiled a series of handouts to voters prior to this week’s announcements. These include an extended moratorium on home loan repayments for the socially needy, home-renovation grants, an exemption from income tax payment obligation for people below the age of 25. In addition, military and law enforcement personnel will get a special bonus equaling six months’ worth in wages in early 2022.

Robust rebound
The prime minister stressed that the economy's robust rebound from the recession triggered by the coronavirus pandemic provided enough fiscal room for the measures. With Hungary’s economy expected to expand by more than 5.5% this year and favorable financing conditions on international markets, Orbán’s has ample room to loosen the grip on spending.
Hungary raised close to 4.4 billion euros in foreign-currency bonds last week to secure funds for higher government spending and a likely delay in EU pandemic relief funds. Brussels and Budapest are currently embroiled in a dispute over Hungary’s fight against corruption and the rule of law.
Orbán stressed that more than 4.7 million people had jobs in July, noting that this was the highest level of employment in Hungary since the change of regime in 1989. The economy added nearly one million jobs over the last 11 years, the prime minister said, adding that Hungary was “just one step away from full employment.”
The prime minister said Hungary was prepared to tackle the second wave of the virus. “The vaccine works and Hungary works,” Orbán said. He added that the economy “has got off to a flying start” with GDP expanding by 17.9% in the second quarter, the “highest figure on record.” Hungary’s full-year GDP growth would reach, or could even exceed, the government’s target of 5.5%, according to the prime minister.
In response to Orbán’s opening remarks, opposition parties showered the government with sharp criticism for what they said was flagrant corruption, runaway prices and the rise in poverty nationwide.
"Three things have increased in Hungary…. the luxury you enjoy, the size of yachts and poverty," said Péter Jakab, leader of the opposition Jobbik party. Recent opinion polls showed Orban's Fidesz and the alliance of opposition parties being neck-and-neck ahead of the 2022 election expected to be held by next spring.