Hungary Unveils Economic Action Plan

by Ulrika Lomas, Tax-News.com, Brussels

10 June 2010

Unveiling details of the government’s latest economic plan, Hungary’s Prime Minister Viktor Orban announced a series of tax cuts, designed to reassure investors and calm nervous markets.

In his announcement, Orban pledged to introduce a flat 16% personal income tax over a period of two years, effectively cutting the rate for all households, and to significantly reduce corporate income tax for small- and medium-sized enterprises generating annual profits of under HUF500m (EUR1.77m), lowering the rate from 19% to 10%. The government also intends to abolish a number of minor taxes.

Orban revealed that the proposed tax cuts are to be financed by the introduction of a new tax levied on the country’s banks, while acknowledging that the precise details of the tax have yet to be determined.

Other measures outlined in the economic proposals include plans to cut public sector pay and to impose a ban on foreign currency mortgages.

Determined to meet its deficit target of 3.8% of gross domestic product (GDP) this year, as agreed with the International Monetary Fund and the European Union, the Hungarian government must save between 1% and 1.5% of GDP, according to Economy and Finance Minister Gyorgy Matolcsy.

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