Yielding ground on flat-rate tax would be difficult, Varga says


Hungary's government would be able to yield ground on the country's flat-rate tax with difficulty at negotiations for financial assistance from the International Monetary Fund and the European Union, minister without portfolio Mihály Varga said in an interview on public television late Monday.

"I don't see too much room for manoeuvre on the matter of the flat-rate tax, but obviously we will listen to what the problem, what the objection to this tax system is," Varga, who is Hungary's chief negotiator at talks with the IMF and EU, said on m1's Az Este program.

He noted that the flat-rate 16% proportional tax would be in place in a "pure form" for the first time form 2013, following a three-year transitional period. Eliminating entirely the practice of adding payroll contributions to the personal income tax base may reduce tax revenue, but it could support economic growth as the extra money is used for consumption or investments, he added.

Asked whether the government would refuse to introduce a tax on real estate or assets if asked by the IMF, Varga said if such questions come up, the government will review them, but he added that it was more than certain that the answer would be no for the time being.

The Hungarian economy is on a path on which the aim is to implement tax cuts, not tax increases, he said.

Varga said questions to clarify the financial transactions duty were sure to come up at talks with the IMF and EU, but he added that the duty did not hurt the central bank's independence.

The duty, approved by Parliament on Monday, applies to some central bank transactions. The independence of Hungary's central bank was a key issue in preparations for negotiations on the precautionary financial assistance from the IMF and EU.

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