Hungarian Business Sector Praises Corporate Tax Regime, Slams Income Taxes

by Ulrika Lomas, Tax-News.com, Brussels

23 November 2001

Speaking at the Conference on Budapest as a Regional Center earlier this week, tax experts praised the Hungarian capital's high quality of life, prime location near the edge of the European Union, and attractive corporate tax regime, but said that the city was being held back as a regional business hub by Hungary's poor transport infrastructure and excessively high levels of social security and personal income tax.

Emery Jakab, Hungarian Managing Director for the international consulting firm Arthur Anderson told delegates that the Hungarian VAT system, with a top rate of 25%, is among the highest in Europe, and pointed to the fact that the 40% highest rate of income tax kicks in at 'outrageously low' pay levels as a possible factor which is discouraging multinational companies from locating in Hungary.

However, the response from the Deputy State Secretary at the Ministry of Finance was not an encouraging one. In answer to Mr Jakab's criticisms of the Hungarian tax regime, Elemer Tertak warned that there would be no dramatic drop in the tax rates until public expenses drop.

He also said that as so few Hungarians earn high wages at present, it is a necessary evil that lower income workers bear the majority of the taxation burden, and that although the top rate of income tax will drop when the country accedes to the European Union, the lowest rate will rise. This, he observed, 'may not be good news'.

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