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EU objects to Hungary bringing forward fuel tax cut

A European Commission official has said Hungary can only bring forward value added tax cuts on fuels to October 1 from January 1 if it does so for other goods it has designated for VAT reductions, business daily Világgazdaság reported on Thursday. The government has said it will proceed with its plan to cut VAT on fuel to 20 % from 25% ahead of reductions on other goods so as to ease the burden of oil price rises on consumers, despite the European Commission's objections. The European Commission highlighted Hungary's tax plans, saying member states cannot lower tax rates to offset the high price of oil. According to the EU’s Directive 6 on VAT, member states can have no more than two discount VAT rates in their tax system, whereas the planned introduction of lower VAT on fuel would result in Hungary having four different VAT rates until the end of the year. The cabinet, which discussed planned tax cuts on Wednesday, will publish its proposals on Monday. The 2006 budget bill will go before Parliament on September 30.