Will Tax on Fringe Benefits for Corporate Health Culture Be Reduced?

BBJ: If I understand correctly, the BeneFit Prize for Happy Employees was recently awarded to companies that contribute to the physical and mental well-being of their colleagues through a complex health program. 

Zsuzsa Mihalik: That's right, we received nearly 100 applications, and the professional prizes were awarded to companies such as MVM, Givaudan, VGD, and Cetelem. When the prize was founded, I had three goals in mind: 

- In the short term, by appealing to both sides of the labor market, the prize can serve as an assurance for employees, as the BeneFit Prize acts as a brand, showing that the winning companies are caring companies where it is worthwhile and a pleasure to work, and for the employer organizations, it is an excellent employer branding tool that can attract potential employees and make those already working there proud. In addition, these companies become role models for other companies and organizations.

- The medium-term goal is to make the corporate health program a strategic priority with the commitment of senior management because this is the new Social Responsibility: taking responsibility for employees. 

- Our long-term goal is aimed at decision-makers: any company that invests in the health of its employees should do so with favorable tax treatment, as we see with the Szép card. Because every forint spent on employee health promotion pays back four times over for the company at the micro level and for Hungary at the macro level.

BBJ: What is the basis of these goals?

ZsM: Between November 17-24, 2023, we conducted a survey among Hungarian companies to find the answer to the question of how much money can flow into the state coffers for fringe benefits that serve health promotion, especially sports, health screenings, examinations, preventive treatments, and mental wellness. The questionnaire was completed by 216 companies employing a total of 308,192 people. The companies surveyed pay a total of HUF 1,756,034,700 in tax on fringe benefits for health promotion (sports, health screenings, examinations, mental well-being). This amounts to a tax revenue of HUF 27 billion per year per 4.7 million employees. According to several Hungarian and even foreign studies, on average, 2.9 fewer days of absence are lost by workers who are health-conscious and regularly take part in sports.  If we multiply these days by the amount of expenditure per day of sick leave - HUF 6,227 day - we get a saving of HUF 18,058/year. This would mean a reduction of nearly HUF 85 bln in social security expenditure for 4.7 million employees. It is easy to see from this that the difference between the HUF 27 bln in tax revenue paid into the state coffers by companies for fringe benefits for health culture at work and the HUF 85 bln in expenditure is not a small sum - HUF 58 billion a year.

BBJ: So we could save HUF 58 bln a year if we lived a healthy life? 

ZsM: Yes, that's right.

BBJ: But then where does the tax cut come in? Why is this necessary if all we have to do is go for check-ups, exercise regularly, and take care of ourselves? 

ZsM: After COVID, prevention has come to the fore, so many people are aware of the importance of staying healthy, but still few people can afford it. Therefore, employers should take this on board, as it is in their interest to have healthy, balanced, and happy employees. However, while the tax on fringe benefits for corporate health culture is the same as the tax on wages, few employers opt for these benefits, preferring to offer the much more tax-efficient (28%) Szép card. However, it cannot be used for health checks, regular exercise, or mental health. Although these would be very important for both parties.

BBJ: So what is the solution?

ZsM: If the tax rate for fringe benefits spent on corporate health culture were the same as for the Szép card, 58% less tax would enter the state budget, but it is safe to say that the tax cut would increase the number of health culture benefits and, despite the tax cut, this would lead to an increase in tax revenue. In addition, in the medium to long term, the amount of money spent on health care - medicine, medical care, ambulance, hospital, etc. - would also decrease. As workers who lead healthy lifestyles stay active longer, labor shortages could be alleviated and, not least, tax revenues would increase. The indirect effect of the tax reduction discussed above would be to improve the mental well-being of the population since a happy worker is the best worker.