“The new Social Security Act adopted on Wednesday, which comes into force on 1 July 2020, simplifies the tax system, reduces public burdens, and helps weed out tax avoiders”, the Minister of Finance’s State Secretary for Tax Affairs Norbert Izer said at a press conference in Budapest on Wednesday.

The State Secretary called the newly adopted legislation a “three-in-one” Act because, as he explained, it fulfils all three of the government’s tax policy goals.

With relation to tax simplification, he indicated that the Ministry of Finance would like to do away with twenty different tax types by the end of the term, meaning that by 2022 it plans to reduce the various types of tax by one third. From 1 July next year, taxpayers will have to pay nine fewer forms of taxation than in 2018. He highlighted that the tax reductions of the new Act positively effect enterprises, families and pensioners.

Mr. Izer also emphasised that the Contributions Act helps weed out the healthcare system’s free-riders: the system automatically filters out people who use healthcare services without being eligible for them, and who by doing so are harming both the budget and people who are paying their taxes properly.

“The new legislation eliminates three types of tax, meaning that from 1 July of next year only one type of contribution will have to be paid instead of four separate ones, an 18.5 percent social security contribution”, the State Secretary pointed out.

A further one billion forints (EUR 3 million) will remain with families in view of the fact that the family benefit will be effective with relation to the whole 18.5 percent social security contribution, he emphasised.

Mr. Izer moved on to the fact that people who work while in retirement will also be in a better situation. “All working pensioners will only have to pay the 15 percent personal income tax with relation to their salary, but no other taxes or contributions. The amendment will leave some 20 billion forints-a-year (EUR 60 million) in the pockets of those affected, and will help more pensioners return to the job market”, he explained.

On the subject of the healthcare services contribution, the State Secretary said that by paying it private individuals become eligible to receive the full range of healthcare services. The rate of this contribution is 7500 forints-a-month (EUR 22.7) this year, and will be 7710 forints-a-month (EUR 23.3) from 1 January.

According to the new regulations, if the amount of contribution owed exceeds three times the monthly contribution, it will not be possible to use social security cards to receive free healthcare services. Eligibility for healthcare services will be reinstated once the balance due is paid.

“The Act provides sufficient time for preparation; everyone will begin with a clean slate on 1 July 2020. Only arrears that arise following 1 July will count towards the three-month backlog”, the State Secretary highlighted.

Mr. Izer stressed that everyone who has been eligible to receive healthcare services to date will continue to be eligible; nobody will lose out on these services.

“In addition to people covered by health insurance, no contribution payment or obligation to pay will be required from, amongst others, pensioners, people receiving various childcare benefits, the socially needy, and the homeless”, he pointed out.

(MTI)