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Contribution Cut, 2018

There is no surprise in the draft of the Act on Social Contribution Tax promulgated last week; the contribution payable by employers will decrease by 2.5 percent to 19.5 percent in 2018.

As the combined result of the minimum wage (HUF 138,000) and guaranteed wage minimum (HUF 180,500) planned for 2018 and the reduction of the social contribution by 2.5 percent to 19.5 percent, wage income and employer payments will change as follows from January: 

Minimum wage

2017

22% social contribution (HUF)

2018

19.5% social contribution (HUF)*

Personnel expenditure157,463166,980
Vocational training contribution1,9132,070
Social contribution28,05026,910
Gross amount127,500138,000
Personal income tax19,12520,700
Individual contribution23,58825,530
Net amount84,78891,770
Amount of tax burden72,67575,210

Guaranteed wage minimum

2017

22% social contribution (HUF)

2018

19.5% social contribution (HUF)

Personnel expenditure

198,835

218,405

Vocational training contribution

2,415

2,708

Social contribution

35,420

35,198

Gross amount

161,000

180,500

Personal income tax

24,150

27,075

Individual contribution

29,785

33,393

Net amount

107,065

120,033

Amount of tax burden

91,770

98,373

*8% planned minimum wage increase

In 2018, income and employer payments will be as follows at the average wage level and other income levels: 

Taxation of wage income (HUF) at different wage levels in 2018

Personnel expenditure

333,960

351,505

436,810

484,000

Vocational training contribution

4,140

4,358

5,415

6,000

Social contribution

53,820

56,648

70,395

78,000

Gross amount

276,000

290,500

361,000

400,000

Personal income tax

41,400

43,575

54,150

60,000

Individual contribution

51,060

53,743

66,785

74,000

Net amount

183,540

193,183

240,065

266,000

Amount of tax burden

150,420

158,323

196,745

218,000

A 4.6 percent average wage increase is able to compensate for the impact of the 2.5 percent contribution cut planned for 2018 on the central budget (based on the 11 percent average wage increase of 2017). 

Public finance data and this year’s average wage figures seem to confirm that the tax revenues lost due to the substantial 5 percent contribution cut of 2017 could be compensated by the payments relating to the increased wage amount. Revenues of the central budget are already positive at a wage growth of above 8.8 percent but the actual increase in wage amount was in fact higher in the economy. 

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