Mixed Reaction To Hungarian PM's Tax Cut Proposals

by Ulrika Lomas, for LawAndTax-News.com, Brussels

29 August 2008

Proposals put forward by Hungarian Prime Minister, Ferenc Gyurcsany, to implement a HUF1.2tn tax cut over the next three years have met with a mixed reception.

Writing in the Hungarian daily Nepszabadsag on Wednesday, Gyurcsany disclosed that two-thirds of the planned tax cuts would benefit companies, to include an effective 2% cut in corporate tax from 2009 when the 4% 'solidarity tax,' a surtax on company profits and top earners, will be removed. At the same time, the main rate of corporate tax will be increased by 2%, giving Hungary a base corporate tax rate of 18%.

However, whilst the PM has received a cautious backing from some of the country's trade unions - particularly the National Association of Entrepreneurs and Employers (VOSZ) - which pronounced the proposals acceptable, strong objections have been voiced by others.

Some observers have accused the government of tilting the tax package in favour of high earners.

Analysts speaking to business daily Napi Gazdasag, and quoted by Realdeal.hu observed that the benefits of the tax cuts will only be felt by individuals earning HUF231,000 or more per month.

In a radio interview given following the unveiling of his tax reform plans, the Prime Minister revealed that he will quit his role should the proposals not gain the approval of parliament.

Gyurcsany now has until September 15, 2008 to push the tax reforms through parliament, but his minority Socialist Party government will be dependent on the support of coalition partners to achieve this result.

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