Gov’t tax proposals little changed from PM’s Consensus Program

The government proposes scrapping the 4% solidarity tax, but raising the corporate tax rate to 18% from 16% from 2009, as was proposed in Prime Minister Ferenc Gyurcsány’s Consensus Program, published in July.

The proposals would no longer allow companies to write off the local business tax or risk reserves, or make adjustments for interest paid or received from other corporate group members. But they would continue to allow deferment of losses, placement of development reserves, preferences for SME investments and the two-year accelerated amortization write-off. The proposals would reduce payroll taxes to 27% of wages from 32% from April 1.

The government proposes introducing an 11% contribution on a broad range of non-wage compensation, including food and vacation vouchers, which is expected to generate an additional Ft 55 billion in budget revenue. At the same time, it proposes eliminating the Ft 400,000 payroll tax-exempt limit on the non-wage compensation. Companies would have to pay a far bigger rehabilitation contribution under the proposals: an annual Ft 532,800 per employee, up from Ft 177,600.

The government would raise the income limit for the 18% personal income tax bracket from Ft 1.7 million to Ft 2 million. The excise tax would be raised by 10% for cigarettes and liquor. The tax changes are expected to save companies about Ft 100 billion and private citizens Ft 45 billion according to the finance ministry’s calculation.

The proposals would broaden the power of tax authorities, allowing them to form an opinion on cost structures and putting the burden of proof on the taxpayer. The proposals would introduce a 6% asset-type tax on corporate vehicles in light of arguments that company cars are used for personal use too. The government will discuss the proposals at a cabinet meeting on Wednesday. (MTI-Econews)