Hungary EcoMin already knows the costs of planned contribution cut

According to National Economy Ministry estimates, the reduction of employers’ social contribution tax (szocho) to 21% from the current 27% in the next two years, would cost the budget

• HUF 330 billion in 2017; and
• HUF 500 bn in 2018

However, the result of the wage hike would be respective surpluses of HUF 180 bn and HUF 270 bn

, which would somewhat offset the revenue loss, i.e. the companies would be able to raise wages from what they save on the lowered contribution.

The document also says that the wage hike would lower budget revenues

• by HUF 50 bn in the public sector in 2017 and by HUF 70 bn in 2018; while
• ghildcare payments (gyed) and sick leave pays could lower revenues by HUF 40 bn and HUF 50 bn, respectively;
• consumer tax and VAT revenues could reach HUF 50 bn in 2017 and HUF 70 bn in 2018;
• HUF 55 bn could be saved both next year and in 2017 in public works on the expected rise in labour demand.

The wage hike and the contribution reduction would lower budget revenues by HUF 15 bn next year, whereas the state expects no related losses in 2018.

In consideration of the economic indicators in 2018 the contribution reduction would be carried on, with two percentage point cuts each year.

The paper also reported that the employers’ side appears willing to accept a 15% wage hike, also because they have relatively few employees in the lowest wage category so the raise would not put an excessive burden on them.

Instead of the proposed 25% raise to the guaranteed wage minimum, however, employers propose only a 20% hike..

Those representing corporate interests believe the contribution reduction should be at least five percentage points next year instead of four.

• Tags:
• economy,
• wage hike,
• minimum wage,
• contribution