Hungarian Liberals To Block PM's Tax Cut Plan

by Ulrika Lomas, Tax-News.com, Brussels

02 September 2008

Ferenc Gyurcsany's minority socialist government in Hungary was dealt a possibly fatal blow at the weekend after a former coalition member pledged not to support his proposals to cut taxes.

Gabor Fodor, chairman of the Free Democrats' Alliance (SzDSz), spoke out on Saturday to convey his opposition to the EUR5bn tax package, which, he argued, is a populist measure aimed at saving Gyurcsany's political skin.

"This program does not serve the survival of the country but of Ferenc Gyurcsany," he declared following a two-day party meeting, which concluded on Saturday.

The tax reforms, announced by Gyurcsany last week, would remove the 4% solidarity tax on corporate income and top rate individual taxpayers and give Hungary a base corporate rate of 18%. The plan also calls for long-term cuts in payroll tax and across-the-board individual tax relief through the raising of income tax thresholds. The tax cuts are paid for in large part by a planned crack down on tax evasion.

Gyurcsany now faces the tough task of securing parliamentary approval for the proposals by September 15, but he has promised to resign if he does not succeed.

However, even in the face of opposition from the SzDSz, whose support he needs to push the reforms through, the Prime Minister declared in an interview with Hungarian daily Nepszava on Saturday that he was "relaxed" over the situation.

“The SZDSZ does not have to identify (with the programme) 100%, but they need to accept it on key points and directions," he stressed.

Recommended