The family tax reform and the pensioner VAT refund, could leave up to 1,600 billion forints (4 billion euros) in the hands of families, reported the Oeconomus Economic Research Foundation.
In his Annual Policy Review on February 22, Prime Minister Viktor Orbán announced two important welfare measures to boost childbearing and reduce food inflation for pensioners. Under these measures, mothers with three children will be exempted from personal income tax from October 2025.
In addition, GYED (childcare allowance) and CSED (income tax-free infant care allowance) recipients will also benefit from tax exemptions.
The total number of people affected by the tax reform (including mothers with at least 4 children and workers under 25 exempted from 2020) will exceed 1.4 million.
The total number of people affected by the tax reform (including mothers with at least 4 children and workers under 25 who will be exempt from 2020) exceeds 1.4 million. In 2026, the budgetary impact of personal income tax exemptions could reach 1,240 billion forint (3 billion euros), which is almost 25 % of the VAT revenue appropriations in this year’s budget.
The impact of the tax reform boosting childbearing based on the number of people and the financial effects; Photo: Oeconomus Economic Research Foundation
The VAT refund scheme for the approximately 2.4 million people covered by the pension scheme is expected to start in the second half of the year. To ensure fairness and avoid exploitation, the government will cap the amount of tax that can be reclaimed on basic foodstuffs at between 10,000-15,000 forints (25-37 euros) per month. As a result, the scheme will reduce the budget’s VAT revenue by up to 432 billion forints (1 billion euros), which is almost 5% of the total 2025 allocation.
The impact of the pensioner VAT-refund. It shows the percent of VAT for basic foodstuff on the left. The maximum amount of refund available will be 10-15 thousand forint per person. Photo: Oeconomus Economic Research Foundation
The VAT rebate allows the state to directly support the retired consumer by bypassing the retailer.
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Via Oeconomus Economic Research Foundation; Featured picture: Pexels
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