Index - Economy - The wages of seven hundred thousand people depend on the tax reduction debate

In order to reach the minimum wage of two hundred thousand forints, the government is ready to compensate enterprises, therefore in Wednesday’s round of wage negotiations it proposed to reduce the rate of social contribution tax (soco) on employers by four percentage points from 1 January 2022, the Ministry of Innovation and Technology announced. (ITM) Secretary of State for Employment Policy, Sándor Bodó. According to MTI’s report, the government made a relatively unsurprising offer of compensation to the negotiating parties at the Permanent Consultation Forum of the Competition Sector and the Government (VKF), after László Parragh, President of the Hungarian Chamber of Commerce and Industry, invited the speaker at the start of the negotiations. emphasizing its holding, it has already dropped the 4 percent rate.

However, it is favorable that it is proposing tax cuts as early as January, while at the beginning of the summer, when the 2022 tax laws were passed, pro-government MPs only voted to reduce the social contribution tax by 1.5 per cent from July and reduce the vocational training contribution tax, which, incidentally, is later incorporated into the soco.

The Secretary of State also pointed out that a 14% increase in the guaranteed minimum wage by the government would be acceptable in exchange for a significant reduction in the employer’s contribution burden, which would mean HUF 250,000 gross per month for employees. He also noted that the position of the employee and employer side of the VKF is still far from each other, however, the parties are working for a quick agreement on the mandatory minimum wage elements for 2022, which was already available in mid-November. He put it that way

the social contribution tax, which will decrease from 15.5 per cent to 11.5 per cent, will leave about five hundred billion forints in enterprises.

This amount is disputed by the employers, László Perlusz, Secretary General of VOSZ, told Index. According to the employer’s calculations, even with the loss of revenue caused by the 5% reduction in social security contributions they would otherwise request, more will flow into the 2022 budget, given the impact that a very significant increase in mandatory minimum wages will have on a much strained labor market. and the wage bands above this.

However, even a social contribution tax of up to four or five per cent must be paid on a minimum wage raised by almost twenty per cent for at least three hundred thousand people, and this already increases budget revenues from 15 per cent of personal income tax and 18.5 per cent of social security contributions. not to mention – said László Perlusz, adding that the same is true for the guaranteed minimum wage, as well as the employee incomes increased by the expected increases in the higher wage categories in order to avoid wage congestion or to retain employees. Not to mention how much VAT the state will have if, in a high-inflation year in 2022, workers spend even half of the increased wages on consumption.

In summary, due to the wage increases, more tax revenue will flow into the budget on other items than would be the case for the 5% reduction in social contribution tax they had requested from January, László Perlusz noted. This has already included the two per cent socio reduction adopted by the tax law, and the government has been asked to include the 12 per cent socos level proposed by them in the vocational training contribution, ie the complete abolition of the 1.5 per cent vocational training contribution. It is true that they have asked for some form of support for companies that have so far spent the amount of the contribution on training their employees.

The unified proposal of the employers would therefore be a guaranteed minimum wage of HUF 245 thousand from January, which falls short of both the government’s proposal and the trade unions’ claim of HUF 260-262 thousand. True, they also added that if the government saw an opportunity for a further three percent socio reduction at any time, either in 2022 or later, they would also give 260 thousand forints. That is

if the government went into an 8 percent soco reduction from January, they would nod relatively quickly to have a minimum wage of 260,000 in one step.

But the employer also sees a need for the government to help businesses with additional support in the sectors hardest hit by the epidemic, such as the hotel and hospitality industry, because the two hundred thousand minimum wage and the increased minimum wage for skilled workers will not be reduced. to be able to manage.

The employee side explicitly insists that in one step, both mandatory minimum wage elements increase significantly. In other words, the minimum wage should be two hundred thousand forints and the guaranteed minimum wage 262 thousand from January, Melinda Mészáros, the president of the League Trade Unions, told Index. To this end, they also support employers ’request for a 5 percent socio reduction. The workers’ side has also made a number of alternative proposals to increase workers’ incomes, such as a return to the minimum wage or a reduction in workers’ contributions, but these have not yet been substantially discussed by the parties.

Among other things, the wage quotation formula – adding the annual GDP and inflation growth rates and adding two percent – that would essentially propose an average wage increase of 11 percent under the VKF agreement for workers earning above the guaranteed minimum wage. According to Melinda Mészáros, there is an agreement that by mid-November all three sides want to reach an agreement on the minimum wage and guaranteed minimum wage in 2022 – so they are now negotiated weekly under the VKF – and then sit down to negotiate the terms of another multi-year wage agreement.

(Cover image: Gorondy-Novák Edit / Index)

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