Hungary Urged to Rethink Reintroduction Of Capital Gains Tax

by Ulrika Lomas, Tax-News.com, Brussels

22 July 2004

Hungary’s top investment firms warned the government on Monday not to reintroduce capital gains tax, arguing it would hit small investors hardest and produce little in the way of extra revenue.

"The reintroduction of capital gains tax would affect nearly 160,000 small investors negatively," an association of Hungarian investment service companies, known as Befektetesi Szolgaltatok Szovetsege (BSZSZ), stated in their plea.

"Therefore the board of BSZSZ asks the government parties to think this measure thoroughly over," the group added.

In a bid to reconnect with its core working class vote, the ruling Socialist Party announced at a news conference earlier this month that consideration was being given to the reintroduction of the 25% capital gains tax, abolished last year.

Party officials also proposed an increase in the top rate of income tax on salaries above 6 million forints ($29,680) per year to 48% from the current level of 38%.

However, BSZSZ argued that this strategy runs counter to the government’s aim of encouraging investment within Hungary, whilst producing a relatively meagre 3.0 billion forints ($14.93 million) in tax revenues.

BSZSZ consists of ten members, and claims to account for 70% of the turnover on Hungary’s stock exchange.

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