In January 2014, the number of employees for whom enterprises utilized allowances was some 800 thousand, up by 50 thousand in comparison to last year, Minister of State for Taxation and Fiscal Regulation Gábor Orbán said at a press conference.
Thanks to the tax incentives of the Job Protection Action Plan, over the past year the Government left some HUF 115bn at enterprises which employ some 100 thousand people, and thus the Cabinet has contributed to the employment of some 750 thousand people, the Minister of State pointed out.
He stressed that it was another positive feature of the measure that allowances could not only be applied to newly hired employees, therefore – in addition to facilitating the hiring of new labour force -- the programme could also help maintain existing headcount and pre-empt fraud.
Gábor Orbán said that as of 1 January 2013 the Government has cut employers’ labour costs by more than half in the first two years for employing people below the age of 25 years and above the age of 55 years, whose gross monthly wage does not exceed HUF 100 thousand, while the same incentive is offered without a time limit for employing people in unskilled jobs. This means, that instead of the usual 28.5 percent employers pay only 14 percent of gross wage as contribution, and thus employers paying a gross monthly wage of HUF 100 thousand save HUF 174 thousand per year.
He added that tax incentives offered by the Government are even larger than this provided the jobseeker is below the age of 25 years or he/she is registered as long-term unemployed. In these cases, employers are fully exempted from paying labour taxes for two years, while they are obliged to pay only 14 percent or half the 28.5 percent “standard” contributions in the third year. Consequently, employers -- by employing a young career-starter or a jobseeker who has formerly been registered as unemployed for more than 6 months – can save as much as HUF 858 thousand in the initial three years of employment. This allowance is also applicable for mothers with small children, due to the extension of the allowance for families with many children as of January this year.
Gábor Orbán stressed that over the past year employment improved in each target group of the Job Protection Action Plan, and as another positive aspect of this scheme the Plan can efficiently complement the new, proportionate, family-friendly tax system.
He emphasised that compared to the former tax credit scheme the current employer tax incentive did indeed result in lowering the tax burden of the most vulnerable employee groups. The problem with the previous scheme was that the amount of tax credits could not be fully utilized, it cost some HUF 400bn and according to estimates about half of those involved are thought to have misused regulations, he said. He added that through the current regulation those receiving a fictitious minimum wage can be better detected.
In the opinion of the Minister of State, the fact that most of those earning a minimum wage or a similar amount do not live in the poorest families, but they are the second or third earners in a middle- or high income family proves that former tax credits which guaranteed tax exemption for minimum wages quite often used to support the low income earners of wealthy families.
As far as the family tax allowance in place since 2011 is concerned, as the income level of families with children is typically more unfavourable, therefore – in addition to the support provided by allowances through the personal income tax system – the introduction of contribution allowances this year results in a tax exempt status for the majority of such families, he pointed out.
He also mentioned the fact that some 90 thousand enterprises have already opted for the two new optional taxes available since 1 January 2013, the lump-sum small enterprise tax and the small enterprise tax, shows the success of these measures.
(Ministry for National Economy)
