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Hungary is one of the countries with the largest declines in taxes and social security contributions on labour income between 2000 and 2011. The average tax wedge (income taxes plus employee and employer social security contributions including payroll taxes minus cash transfers as a percentage of total labour costs) decreased by between 5 and 14 percentage points over this period for the households in the Taxing Wages Report. Nonetheless, in 2011 the tax wedge was about 7 to 14 percentage points higher than the OECD average for all family types except the single parent with low earnings; their tax wedge was 4 precentage points above average. Single taxpayers with average earnings took home less than 54% of what they cost to their employer (“total labour costs”). Single taxpayers with high earnings took home less than 49%.
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Tax Wedge in % of labour costs for different wage levels
and household types, 2000 and 2011
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The tax wedge decreased significantly for all family types between 2000 and 2011. Single parents with low earnings benefited most from the tax cuts implemented over this period.
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download the above graph and data for all OECD countries (xls/729kB)
The overall tax burden decreased considerably from 2010 to 2011 for most of households in the Taxing Wages Report as a result of reforms in tax reliefs related to children and the introduction of a unique tax rate. For all the families with children and the single taxpayers earning 167% of the average wage the tax wedges declined more in Hungary than in any other OECD country. The tax wedge decreased the most for single parents earning 67% of the average wage; it dropped by 7.3 percentage points to 20.0% of total labour costs. In contrast, the tax burden significantly increased for single workers with average and low earnings due to reduced employee tax credits. For single taxpayers at the average wage; it rose by 2.8 percentage points to 49.4% of total labour costs. For single taxpayers earning 67% of the average wage, the tax wedge increased by 1.4 percentage point to 45.2% of total labour costs.
The tax wedge in Taxing Wages is calculated on the basis of the average gross wage earnings of full-time employees in the private sector (including employees at management level). The corresponding 2011 annual average gross wage for Hungary was HUF 2 624 088 (Secretariat estimate).
Graphical Exposition of the 2011 Estimated Tax Burden
The graphs in this section show the estimated tax burden on labour income in 2011 for gross wage earnings between 50 per cent and 250 per cent of the average wage (AW). They cover four family types with the average and marginal tax wedge presented in a separate graph for each:
- single taxpayers without children,
- single parents with 2 children,
- one-earner married couples without children, and
- one-earner married couples with 2 children
There are two graphs for each family type – one showing the average tax wedge as a percentage of total labour costs (TLC) and the corresponding net personal average tax rate as a percentage of gross earnings; the other showing the marginal tax wedge and the net personal marginal tax rate. Each graph presents a breakdown of the tax wedge into five separate components as a percentage of TLC:
- central income taxes,
- local income taxes,
- employee social security contributions,
- employer social security contributions, and
- family benefits.
Download the AVERAGE graphical expositon file, 2011 (XLS/609kB)
Download the MARGINAL graphical expositon file, 2011 (XLS/644kB)
Observations from the OECD concerning the data for 2011 can be found within the publication.
Special Feature: Wage Income Tax Reforms and Changes in Tax Burdens in Hungary: 2000-2009
The Special Feature of the 2010 edition of the Taxing Wages report calculates the changes over time in the tax burden on wage income ranging from 50% to 250% of the average wage by comparing the tax burden in 2009 with the tax burden in 2000 and calculates the respective contributions of changes in income taxes, employee social security contributions, employer social security contributions and cash benefits. The analysis focuses on changes in the average and marginal tax wedge as well as changes in the net personal average and marginal tax rate.
Change in the average tax wedge (2000 - 2009) (xls/1.5Mb)
Change in the marginal tax wedge (2000 - 2009) (xls/1.2Mb)
Change in net personal average tax rate (2000 - 2009) (xls/1.5Mb)
Change in net personal marginal tax rate (2000 - 2009) (xls/1.2Mb)
A guide for interpreting the attached special feature country charts (doc/350kB)
More Information
A detailed description of the tax system in Hungary and the associated calculations for the tax wedge are included in Taxing Wages 2010.
Comparative analyses comparing country data can be found on our free online database OECD.StatExtracts, under: Public Sector, Taxation and Market Regulation > Taxation > Taxing wages.
Access to the complete dataset shown in the Taxing Wages report, including detailed country information, is through subscription. For details on how to subscribe please visit our "Getting Online Access" page at the OECD Library website.
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