Incentive Elements of Household Savings in the Hungarian Tax System

Zsuzsanna Szeles

doi:10.22158/jepf.v4n3p264

Abstract

Of the regulatory systems, the tax system is one of the most important instruments for the government to encourage savings. Although tax systems are relatively stable, in fact, they are constantly changing. Taxes and their rates, as well as changes in other factors, serve to implement different tax policies. The primary purpose of the tax system is to redistribute income and enforce fairness to achieve effective results. Changes in tax laws can influence long-term savings decisions either positively or negatively. I analized the incentive elements of household savings in the Hungarian tax system which applicable today and the discounts that could be used in the past. I collected other discounts which has contact with tax system and helps long term savings. The Hungarian state offers three possibilities of self-help for pension purposes in the personal income tax system, which are voluntary pension fund, retirement savings account and pension insurance. I compared these possibilities and analized by different point of views. Furthermore, they support health insurance and mutual funds, from 2014 onwards the government merged the discounts. In my opinion, governments play an important role in creating economic prosperity in countries.

Highlights

Savings, that is, income which is not spent on purchasing products and services for current consumption, can be studied in many ways
Governments play an important role in creating economic prosperity in countries
From 2014 onwards, a total limit of $ 995 (280 thousand HUF) was introduced for voluntary fund payments, the amount paid for the retirement savings account and the pension insurance contributions. 3.2.1 Pension Fund The Hungarian pension system was radically transformed on 1 January 1998, and the former pay-as-you-go social security system became a mixed system

Summary

Introduction

That is, income which is not spent on purchasing products and services for current consumption, can be studied in many ways. It can provide a fair distribution of burden as many tax allowances and exemptions can be incorporated into the system It can be an effective means of achieving economic and social policy goals (Bozsik & Fellegi, 2010). The application of tax incentives and tax exemptions is an important tax policy, but the effects of taxation are very complex and difficult to measure For those with taxable income, tax relief and, those who can use it means a great benefit. Changes in tax incentives and their decreases have a negative impact, as it creates an unforeseeable situation when making long-term financial and savings decisions. In Hungary, the savings are helped in three different forms

The Provisions of the Personal Income Tax Act Related to Household Savings

Pension insurance

Voluntary Mutual Insurance Fund Payments

Findings

Conclusions