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)