Norbert Izer, state secretary at the finance ministry, said the economy’s growth was backed by tax cuts, adding that reductions may be continued as the central budget has “stable and predictable foundations”. Social contributions paid by companies are set to be cut from 17.5% to 15.5% by October this year. The social contribution tax was reduced from 27% to 17.5% in July 2019.
Employers had earlier pressed the government to bring forward the planned payroll tax cut to the start of the calendar year rather than July 1, when last year’s reduction took effect, but the government rejected the request, citing fiscal reasons, according to one business association leader.
Under a deal the government sealed with employers and unions late in 2016 linking payroll tax cuts to wage rises, the payroll tax was reduced from 27% in 2016 to 22% in 2017 and 19.5% in 2018. From 2019, payroll tax is to be reduced a further four times by two percentage points on each occasion as long as the gross average private sector wage rises at least 6% year on year in the first quarter of the given year.