According to the calculation of the Ministry for National Economy, the extension of the family tax allowance system will leave some HUF 50bn more at 270 thousand households, and thus the Hungarian family-friendly taxation system will support even more families with children, Minister of State for Taxation and Financial Affairs Gábor Orbán said at a press conference in Budapest.
Gábor Orbán stressed that those involved are entitled to slash the remainder of the tax allowance not deductible from the personal income tax base from the 7 percent healthcare insurance contribution and/or the 10 percent pension contribution, and therefore the maximum proportion of tax savings increases from 16 percent to 33 percent of the gross wage.
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He emphasised that the bulk of extra income will be received by those households with three or more children and families with one breadwinner and two children who until now could not fully benefit from the entire amount of allowance.
Orbán Gábor stated that immediately after the Government had taken office it examined the significant mismatch in Hungary between actual demographic processes and the values and traditions of the population with regard to having children. The Government has concluded that although Hungarian citizens place children and family among top values, Eurostat data signal that as far as the number of births is concerned the country is among the tail-enders on the EU ranking, he added.
He pointed out that in light of international studies the number of children planned by couples averaged 2-2.2 in 2010, while the fertility rate (the number of births per woman in childbearing age) fell to below 1.3. On the other hand, it is a promising sign that the former downward trend appears to have been reversed over the past years as this indicator improved from 1.25 to 1.34 by 2012.
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Gábor Orbán underlined that in order to change the demographic situation the Government has decided to implement incentives in various fields which support the employment of those with children and improve the financial status of families. Over the past years, he added, the Government has introduced several family policy incentives designed to harmonize work and family and it also decided to create a new, family-friendly personal income tax system which acknowledges the costs of raising children. He stressed that until 2010 only those families had been granted a maximum monthly tax allowance of HUF 4000 per children which raised at least three children, whereas since 2011 parents with one, two or three children have been entitled to monthly allowances of HUF 10 000, HUF 20 000 and HUF 99 000, respectively, while those with more than three children are granted another HUF 33 000 per month for every child above this threshold.
He also highlighted the fact that as data indicate in 2010 families had had an extra amount of only HUF 12bn at their disposal to spend on childcare-related expenses, but this amount was only available for families which raised at least three children. However, in 2011 and 2012 this amount was already HUF 180bn and HUF 184bn, respectively, he added. According to calculations of the Ministry for National Economy, the amount of support is expected to remain at this level in 2013, while in 2014 -- as a result of the extension of the family tax allowance scheme -- some HUF 230bn will be left at parents, he said.
Gábor Orbán stressed that the amount left at families through taxes is not the only indicator which signals improvement regarding the financial status of families: according to KSH data, between 2010 and 2013 net average wages increased by 17.8 percent in the country, thanks partly to the family tax allowance scheme and the stimulating effect of the new taxation system on employment.
The Minister of State also spoke about the effect of lower taxes for families which – in light of estimates – have boosted the income of families by some HUF 500bn over the past three years which in turn also stimulated consumption and savings.
(Ministry for National Economy)
