The Hungarian government is currently considering two proposals to replace the unpopular local business tax, economy minister Ivan Csillag announced on Monday.
The local business tax has been cited by many as a major disincentive to investment in Hungary, especially from foreign sources, primarily as it is based upon a firm’s revenues as opposed to profits. Nevertheless, it represents the main source of income for local governments (accounting for as much as 92% of their total income) presenting somewhat of a dilemma for the national government to solve.
The two proposals announced by Csillag would either allow companies to write off 100% of the local tax against corporate tax, instead of the current 25%, or direct an increasing proportion of overall corporate tax revenues from central government to local council coffers.
More concrete proposals are likely to be presented some time in the summer when a National Competitiveness Strategy is presented, which is expected to include action plans for the budgetary years of 2005/2006.
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