Gov’t package to reduce taxes by Ft 205 bln in 2009

Banking

The government’s tax package will reduce the tax burden by a gross Ft 205 billion next year, under the originally planned Ft 260 billion, but net tax savings will still reach Ft 145 billion, as announced earlier, Finance Minister János Veres announced after the package was submitted to Parliament on Friday.

The decision to cut the gross reduction was made after talks with social partners, Veres said. Businesses will enjoy two-thirds of the savings and private citizens one-third.

Veres noted some changes made to an earlier draft of the package published on the Finance Ministry’s website a week earlier: a proposal to levy an 11% tax on many forms of non-wage compensation, such as meal vouchers, was scrapped; and payroll taxes will be lowered by four percentage points from April 1 instead of by five percentage points.

The changes to the proposals will not require any changes to Hungary’s 3.2%-of-GDP general government deficit target for 2009, he added.

Three-fourths of the amount to cover the lost budget revenue as a result of the tax cuts will come from expenditure cuts. The rest will come from a restructuring of taxes.

The package would scrap the 4% “solidarity” tax, but raise the corporate tax to 18% from 16%. Corporate tax benefits tied to employment will remain unchanged and payroll tax on monthly wages up to Ft 140,000 will fall by four percentage points to 28%.

The package would introduce a 7% tax on the resale value of corporate vehicles, though the tax base may be reduced 10% in each of the first two years after the purchase of the vehicle and by 5% each year after that. All other requirements, such as keeping a log of vehicle lose, will be dropped. The package would raise the upper limit on the 18% personal income tax bracket to an annual Ft 2 million from Ft 1.7 million.

Answering a question, Veres said the government would submit an independent proposal to Parliament to introduce an 8% profit based Robin Hood tax, the proceeds of which would be used to set up a compensation fund for homeowners with district heating. Homeowners whose annual income does not exceed Ft 3.4 million will be offered Ft 100,000 for home improvements.(MTI-Econews)

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