Hungarian Government May Back Flat Rate Of Income Tax

by Ulrika Lomas, Tax-News.com, Brussels

23 July 2004

Hungarian Finance Minister Tibor Draskovics revealed on Thursday that he would be prepared to examine the possibility of a flat rate of income tax, provided it would not favour wealthy taxpayers.

"I do not rule out the possibility that we apply such a simplified solution, especially as an option, an alternative," Draskovics stated in a national television broadcast.

The Finance Minster was responding to a proposal by the junior liberal coalition party for a 30% optional flat rate of income tax for those prepared to pay it.

However, Draskovics warned that such an idea would need careful consideration to ensure that a flat tax would not benefit those on high incomes to the detriment of the poor.

The taxation issue has come very much to the fore in recent weeks, after the ruling Socialist Party suggested an increase in the top rate of income tax from the current 38% to 48%, and the reintroduction of capital gains tax at 25%.

Taxation proposals for 2005 have also provided a source of constant friction between the Socialists and coalition partners the Free Democrats (SZDSZ).

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