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Gov't accepts alternative proposal for VAT rise

In a compromise reached with employers and unions on Tuesday, the government agreed to raise the preferential 15% VAT rate to 17% and the main 20% rate to 23%, rather than raising only the preferential rate to 20%, undersecretary at the Finance Ministry Tamás Katona announced.

The government originally planned to raise the preferential VAT rate, which applies to food and other products, to 20% from September 1.
The new solution will lessen the burden for low-income households and generate a similar amount of budget revenue as the original proposal, according to market observers. The government originally planned for the VAT raise to bring in an additional Ft 60 billion in budget revenue in 2006 and an extra Ft 170 billion in 2007.