From sugar to alcohol to properties, taxation has been used as a social engineering tool for centuries. If you walk around London, you’ll see plenty of bricked-over windows on old buildings. Why are they bricked-over? Several hundred years ago, the Government wanted fewer windows, so began to tax properties based on their windows! Last year’s sugar tax is a more recent example – it was explicitly aimed at decreasing the consumption of sugary drinks.
One thing you wouldn’t expect taxation to be used for, though, is to encourage a baby boom. Taxes have been used to keep populations down – China’s One Child Policy enforced an effective tax on families with more children. However, it’s not the first thing that jumps to mind to encourage population growth. Yet the Hungarian government recently announced that Hungarian women with 4 or more children would be completely exempt from income tax. Along with interest-free loans equivalent to £27,000 that are written off once a couple has three children, the government is using these measures to try increase their rapidly-declining population.
It’s an interesting, if unorthodox, move. In many countries, it could mean a major increase in available funds. However, Hungary taxes income at a flat rate of 15% – still a large amount of money to be saved, but a far cry from the 20-50%+ you see across the rest of Europe. In a country where the average family only has one child, how far will that money actually stretch with 3 extra children to provide for?
For further information please contact your local AIMS accountant.