Bajnai To Further Increase Hungarian Tax Burden

by Ulrika Lomas, Tax-News.com, Brussels

11 May 2009

In an announcement on Hungarian television, Prime Minister Gordon Bajnai announced that the government is considering introducing a ‘fair’ property tax, with the majority of the burden falling on those with higher value property.

Bajnai said the government is currently in the process of considering which property tax system it will implement in order to raise HUF10bn.

The latest announcement will further increase the tax burden on Hungarian citizens, which was already substantially increased in the recent austerity budget.

Within the austerity budget, approved this week by Hungarian parliament, the public sector will be subject to particularly stiff measures; wages will be frozen until 2011; the thirteenth month pension allowance will be abolished; and government at regional and municipal level will be subject to restructuring. Bajnai however did allow for the possibility of compensation for losses from the elimination of the thirteenth month pension when the financial and economic crisis subsides.

Bajnai’s plans to increase the number of working people in Hungary will see the retirement age hiked over a period of time from 62 to 65. Family support will be frozen at its current level for two years, sickness benefit will be cut from 70% to 60%; child support will be reduced until 2011; and energy subsidies will be phased out in the short-term. The budget sees an increase of 5% in Value-Added Tax (VAT) from 20% to 25%, whilst essential goods (including milk, bread and heating) will now be subject to a reduced rate of 18%.

Personal income tax brackets will be adjusted. Bajnai’s budget included a reduction in employers’ payroll tax of 5% and a simplified corporation tax system. Corporate income tax was reduced within the budget from 20% to 19% overall, by the removal of the 4% solidarity tax, and an increase in the corporation tax rate of 3%.

Recommended