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 minimum wage (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 expenditure | 157,463 | 166,980 |
| Vocational training contribution | 1,913 | 2,070 |
| Social contribution | 28,050 | 26,910 |
| Gross amount | 127,500 | 138,000 |
| Personal income tax | 19,125 | 20,700 |
| Individual contribution | 23,588 | 25,530 |
| Net amount | 84,788 | 91,770 |
| Amount of tax burden | 72,675 | 75,210 |
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.
