Hungary Will Not Get Income Tax Changes In 2004

by Ulrika Lomas, Tax-News.com, Brussels

18 July 2003

The changes to personal income taxation scheduled for 2004 will now not materialise until 2005 the Hungarian Finance Minister Csaba Laszlo revealed this week, according to a report from Interfax.

Government spokesman Zoltan J Gal confirmed to reporters recently that next year will "not be a year of large tax reductions" though indicating that tax will be reduced in 2005.

These recent revelations seem to contradict earlier statements by the finance minister who recently said that the slowing of the central European economy had caused competition in the region to become "significantly strong" and that giving the country an edge over its local competition was one of the main priorities of the government in 2004.

Instead, the Hungarian government intends to save between HUF 120 to 130 billion in next year's budget through the elimination of certain tax breaks. Whilst it is not known exactly which tax breaks will be dispensed with, changes to VAT (Value Added Tax) will net the government an extra HUF 85 billion, according to reports. Though the top rate of VAT is being reduced from 23% from 25%, the scope of the tax is being widened to encompass household fuel (except natural gas) and personal transport services.

Furthermore, 'offshore' taxes is likely to be raised from 3% to 4% and company car tax may be doubled. Environmental taxes are expected to raise an additional HUF 22 billion for the government.

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