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Base for flat-rate tax still to include employer contributions in 2011-2012

The government will introduce a 16% flat-rate personal income tax from 2011, but the tax base will still contain employer contributions on top of gross wages, internet portal index.hu said on Wednesday, without citing any sources.

The flat-rate tax will be paid on gross wages multiplied by a factor of 1.27 in 2011 and by 1.135 in 2012. From 2013, the tax base will revert to gross wages alone.

The gradual reduction in the tax base means Hungarians will pay about 20.3%of their gross wage in 2011 and 18.2% in 2012, index.hu said.

Currently, Hungarians pay no tax on minimum wage, a 17% personal income tax over that up to HUF 5 million a year and 32% on income over that.

The government will expand a tax preference for families with three or more children to include families with one or two children, index.hu said. The tax preference is now HUF 4,000 per child per month, but may be deducted from the taxes of just one parent. The government wants to raise the preference to HUF 8,000 – HUF 10,000 per child per month for families with 1-2 children and to HUF 15,000 – HUF 20,000 per child per months for families with three or more children, index.hu said.

Because these changes will reduce budget revenue by HUF 300 billion – HUF 400 billion a year, the government will place more restrictions on deductions, extend the Robin Hood tax on energy companies and introduce an extraordinary tax on telecommunications companies, the internet portal said. The government does not plan any changes to the system of contributions, it added. (MTI-Econews)