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Gov’t plans to halve tax preference for wage compensation in 2013

The government plans to maintain a wage compensation scheme next year, but wants to halve the related tax preference, a senior government official said on Thursday.

The government assumed in the 2013 budget bill that the tax preference would be halved next year, National Economy Ministry state secretary Péter Benő Banai said at an online press conference on Thursday.

Employers who raise the wages of low-earners to prevent a fall in their net wages that would otherwise result from tax changes may avail of the preference. These employers may deduct any amount over a requisite 5% wage rise from payroll contributions.

The tax preference will cost the budget HUF 64 billion next year, down from about HUF 115 billion targeted for this year, Econews calculated based on the budget bill submitted to Parliament on Friday.

The 2013 budget bill has allocated an additional HUF 89.5 billion for the wage compensation of those employed in the public sphere, up from a HUF 64 billion allocation in this year's budget.

Spending on wage compensation of public sector employees will exceed the HUF 64 billion target, Banai told Econews, adding that the overshot will by no means will endanger the 2.2% fiscal deficit target.

Banai noted that in addition to these two main items, next year's budget allocates a further HUF 4.4 billion to compensate those on maternity leave.

Overall, the government earmarks about HUF 160 billion on combined wage compensation next year, Econews calculated based on the 2013 budget bill. The respective target in this year's budget is about HUF 180 billion, excluding the HUF 20 billion the government made available at tenders.