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Work Incentives and Recent Reforms of the Tax and Benefit System in Hungary

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  • Tímea Ladányi
  • Rafal Kierzenkowski
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    Abstract

    Reducing the extent of inactivity and promoting labour supply is essential to foster labour market outcomes in Hungary in the medium term. Notwithstanding specific factors linked to education, the pension system or family and disability policies, financial disincentives play an important role in this regard. This paper describes the impact of recent reforms of the tax and benefit system in Hungary on some indicators of financial incentives to enter the labour market derived from OECD tax and benefit models. While personal income taxes were cut and the system of tax allowances for families became more generous other welfare benefits were reduced or phased out, which causes significant changes in the incentives for workers, inactive or unemployed people. Between 2010 and 2012, the average tax wedge dropped for high-income earners and/or families with two children, but increased mainly for individuals without children and income below the 80th percentile, which was partly mitigated by the implementation of compensation schemes. However, there is still a large gap in the average tax wedge with the OECD average and regional peers, notably driven by high social security contributions. The implicit tax on returning to work from unemployment remains relatively high and increased below the average wage for most family types. However, it was cut above that level. The absolute level of the implicit tax on returning to work from inactivity is significantly lower notably following across-the-board cuts for lone parents and one-earner married couples with two children, somewhat offset by increases below the average wage for families without children. Les incitations au travail et les récentes réformes du système de prélèvements et de prestations en Hongrie La réduction du taux d’inactivité et l’augmentation de l’offre de travail sont deux éléments essentiels pour promouvoir de meilleurs résultats en termes d’emploi à moyen terme en Hongrie. Outre des facteurs spécifiques liés à l’éducation, au système de retraite, ou aux politiques en faveur de la famille ou des handicapés, les contre-incitations financières jouent un rôle important à cet égard. Cet article décrit l’impact des réformes récentes du système de prélèvements et de prestations hongrois sur certains indicateurs d’incitations au retour à l’emploi issus de modèles de prélèvements et de prestations élaborés par l’OCDE. Parallèlement à la baisse de l’impôt sur le revenu des personnes physiques et à des allègements fiscaux plus généreux accordés aux familles, d’autres prestations sociales ont été réduites ou progressivement supprimées, modifiant dans une large mesure les incitations pour les travailleurs, les inactifs ou les chômeurs. Entre 2010 et 2012, le coin fiscal moyen a baissé pour hauts salaires et/ou les familles avec deux enfants, mais s’est accentué essentiellement pour les personnes sans enfants et les salaires inférieurs au 80e centile, ce qui a été atténué par la mise en oeuvre d’un système d’indemnisation. Le coin fiscal moyen reste toutefois largement supérieur à la moyenne de l’OCDE et des pays de la région, notamment en raison du niveau élevé des contributions à la sécurité sociale. Le taux implicite d’imposition sur la reprise d’une activité professionnelle à l’issue d’une période de chômage reste relativement élevé et a augmenté pour les revenus inférieurs à la moyenne pour la plupart des catégories de ménages. Il a toutefois été réduit pour les salaires supérieurs à ce niveau. En valeur absolue, le taux implicite d’imposition sur le retour à l’emploi des inactifs est nettement inférieur, notamment à la suite des réductions globales en faveur des parents isolés et des ménages à revenu unique avec deux enfants, même s’il a augmenté pour les ménages à bas revenu sans enfants.

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    File URL: http://dx.doi.org/10.1787/5k9d1969m56b-en
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    Bibliographic Info

    Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 944.

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    Date of creation: 09 Mar 2012
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    Handle: RePEc:oec:ecoaaa:944-en

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    Keywords: implicit tax; benefit system; effective tax rate; replacement rate; Hungary; tax wedge; labour supply; système de prestations; taux implicite d’imposition; taux d’imposition effectif; Hongrie; taux de remplacement; offre de travail; coin fiscal;

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