Hungary has passed a law exempting women with two or three children from paying income tax as part of a costly campaign to reverse the demographic decline.

Prime Minister Viktor Orbán's government has adopted a series of measures to boost the birth rate since 2010, including subsidized loans, housing assistance for families, and tax breaks for women with four or more children.

Under the new law passed by parliament today, mothers of two children under the age of 40 will receive lifetime income tax exemptions starting next year, with the benefits gradually extended to all mothers of at least two children by 2029.

Mothers of three children will be exempt from income tax from October this year under legislation passed on Tuesday, April 29.

Orbán described it as "the biggest tax reduction program in Europe," which will turn Hungary into a "tax haven for families," although "it is not easy to achieve financially."

Economists warn that the measures represent a significant budgetary challenge, and the government has acknowledged that they will cost €2.38 billion by 2029.

Critics accuse Orbán of spending to help him ahead of elections scheduled for next year in the country of 9.5 million people.

According to official statistics, Hungary's birth rate has fallen in recent years to 1.31 children per woman in March, down from a peak of 1.61 in 2021, above the EU average of 1.53 for the same year.

The government's goal is to reach a birth rate of 2.1 by 2035, which it believes will reverse the population decline.

In 2011, the birth rate in Hungary was at a record low of 1.23. | BGNES, AFP