Hungarian minimum wage earners have to pay the highest taxes in the world
Contents News/Article Date: 3rd October 2022
Relating to which Act: COUNTRY – HUNGARY: Act CXVII of 1995 on Personal Income Tax In the interest of ensuring tax revenues and based on the constitutional duty of citizens to contribute to public revenues, the Parliament has adopted the following Act:
Type: Daily News Hungary
Pertains to: Employers and In the Republic of Hungary private individuals shall fulfill their constitutional duty to contribute to public revenues from their income in accordance with the provisions of this Act, with due consideration of the provisions of the Taxation Act as well.
Relevance of this news: Karma Management Global Consulting Solutions Pvt. Ltd is in the business of Payroll, Outsourcing, and Regulatory Compliances from its inception in 2004 and since then, has brought in a lot of efficiencies and technological upgradations with experts on its roll, to ease the hassles of Payroll Processing, Temp Staffing, On-boarding Management, Regulatory and Payroll compliances by providing customized solutions to all its elite clients.
Karma Global over a period of 18 years has evolved tremendously on the domestic front and gauging the potential of its vast inherent strengths and resources, undertook the bold step in April 2021, to move onward to foreign shores for showcasing its excellent services backed by high-grade technology, and thus this became the biggest momentum for Karma to set its offices in Canada, US, UK, UAE, Philippines, and Asia.
Recently two remarkable things happened on the global front for Karma, one significant achievement was the appointment of Pratik Vaidya, CVO & MD to lead an over hundred member SME delegation to the US Select Summit and the second was the participation of Pratik Vaidya in the Advantage Austria which has given Karma Management the competitive edge to surge ahead in the industry.
Subject: Hungarian minimum wage earners have to pay the highest taxes in the world
For greater details, appended below is the complete news item
KARMA IS A GLOBAL TECH FIRM, HANDLING PAYROLL IN CANADA, THE US, THE UK, UAE, THE PHILIPPINES, ASIA, KEEP A VIGILANT TRACK OF MINIMUM WAGES IN EUROPEAN AND ASIAN NATIONS.
Hungarian minimum wage earners have to pay the highest taxes in the world
The Hungarian tax system has been the subject of numerous criticisms as it tends to favor wealthier citizens.
However, there are discounts for those who earn the least in Hungary.
Hungarian minimum wage earners have the highest tax burden The annual report of the International Labor Organization (ILO) contains information about taxation in Hungary. They examined the taxation of the minimum wage in 42 countries. According to their analysis, the tax burden on minimum wage earners is the highest in Hungary worldwide, as per reports Only Germany has higher taxes, but several member states of the United States, as well as Belgium, impose fewer taxes on minimum wage earners.
High-income earners pay particularly low taxes
While the poor are struggling to pay huge amounts of money, the wealthier class enjoys particularly low taxes. Out of 154 countries and territories, Hungary has the 59th lowest taxation of high-income earners, as per the report.
Among European countries, only the similarly or less developed countries (Albania, Montenegro, Moldova, Bulgaria) apply lower taxes. The only developed country that applies income taxes similar to Hungary is New Zealand. However, there are discounts for low earners there, too.
Being single and poor is the most expensive in Hungary
Those Hungarian taxpayers who live alone and have no children pay a particularly high amount of taxes. There is no other developed country where a childless worker earning half the average wage would have to pay such a high tax burden as in Hungary. Those earning half of the average wage must pay 1,6 times the average deduction typical among OECD members from their wages to public costs. Even in Belgium, which imposes the highest tax burden in the world, it is much better to be poor in terms of taxation than in Hungary. Belgian workers earning half the average wage pay a third less in taxes and contributions than Hungarians.
Family support Although people living in Hungary have to pay high taxes, there are some discounts, too.
The government expresses its support towards families in the form of family support money. Since 2009, it is HUF 12,000 (EUR 28,26) per month for one child, HUF 13,300 (EUR 31,33) for two children, and HUF 16,000 (EUR 37,69) for three or more children. However, this is still shockingly low according to the OECD report. A family with an average income pays more taxes on their income in Hungary than the average in developed countries.
PERSONAL INCOME TAX
1. TAXPAYERS
In Hungary, the income of private individuals resident in Hungary is comprehensively taxable, they pay taxes on the basis of their domestic and foreign income. The tax liability of private individuals having tax residence abroad only encompasses income generated from Hungary or income taxable in Hungary based on international agreements or reciprocity.
2. TAXABLE INCOME
Any type of income of private individuals is taxable in respect of personal income tax except for those which are exempted from tax by law. Act CXVII of 1995 on Personal Income Tax (henceforward: PIT tax) identifies the following income categories for private individuals:
- Incomes from activities other than self-employment, self-employment activities, and other consolidated incomes belong to the category of incomes to be consolidated.
- Separately taxed incomes are capital gains, incomes from private entrepreneurship, and incomes generated from the sale of real estate or movable property.
As of 2016 the rate of personal income tax is 15%.
SOCIAL SECURITY CONTRIBUTIONS
1. PAYMENT OF CONTRIBUTIONS
The insured persons (employees) have an obligation to pay contributions to cover social security services and labour market objectives.
Among others ensured are:
- those in an employment relationship,
- the private entrepreneurs and members of business partnerships if not retired,
- persons in a special legal relationship of working personally in exchange for compensation (for instance on the basis of a commission contract) if their compensation reaches a certain amount of money.
The ensured
- pays an 8.5 percent healthcare and labour market contribution and
- a 10 percent pension contribution.
The base of the contributions is – among others – the income taken into account when the tax advance payment is calculated from the income derived from self-employment and non-self-employment consolidated in accordance with the PIT Act, and in the lack of that, the base salary fixed in the working contract.
Administration: Contributions are established, subtracted by the employer, and declared by them to the National Tax and Customs Administration (NTCA) until the 12th day of the month following the month in question which also serves as the payment deadline.
Contributions paid by private entrepreneurs
The ensured private entrepreneur pays a 10 percent pension contribution and 8.5 percent labour market contribution. In the case of tax payment according to the entrepreneurial revenues, the tax base is the entrepreneurial withdrawal, in the case of flat rate taxation, the base of contribution is the income established in the lump sum with the condition that the base of the pension contribution is at least the monthly minimum wage (111,000 HUF in 2016), and the base of the health insurance and labour market contribution is at least the amount one and a half times that of the minimum wage.
The rules of the contribution payment obligations of the private entrepreneur are different from the above if they are full-time students in a secondary school or higher education establishment, they are in an employment relationship besides their entrepreneurial activities or if they are retired etc.
Administration: The ensured private entrepreneur is obliged to declare and pay their contributions until the 12th day of the month following the month in question.
Contributions paid by members of business partnerships
Contribution payments of members of business partnerships depend on the type of legal relationship (employment relationship, commission relationship in accordance with the Civil Code, or as a member) in the framework of which they work in a business partnership. Whether or not the member is also the manager of the business partnership is also an important factor.