Tax Cuts Key To Hungarian Competitiveness Says Finance Minister

by Ulrika Lomas, Tax-News.com, Brussels

30 June 2003

Hungarian Finance Minster Csaba Laszlo told the press last week that reducing levels of taxation was crucial to increasing the country's international competitiveness.

The minister stated that the slowing of the central European economy had caused competition in the region to become "significantly strong" and therefore giving the country an edge over its local competition was one of the main priorities of the government in 2004.

Hungarian local taxes have been a major bone of contention recently with some experts arguing they deter foreign investment and are incompatible with European Union tax regimes. Under the local tax system, local municipalities enjoy the right to charge a tax of between 0% and 2% on a company's revenues, which all firms and entrepreneurs are obliged to pay. It allows for certain deductions, such as the cost of raw materials used in manufacturing, though many complain this means that the tax hits businesses in the services sector particularly hard.

However, the KPMG corporate tax survey revealed that the country's business tax rate compares very favourably with both regional and global competitors. Hungary's corporate tax of 18% was found to be the second lowest among OECD members, second only to Ireland which reduced its corporate tax from 16% to 12.5% in the last year.

Recommended