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Lower labor tax might have little effect

Hungarian companies welcome the Bajnai government's steps to reduce taxes on labor, but still think the effect of the measures will be limited, a representative survey of more than a thousand companies by Szonda Ipsos and Lépéselő reveals.

Two-thirds of companies surveyed said lower payroll taxes and the elimination of the fixed healthcare contribution would help preserve jobs, but only to a small extent. Two-thirds of the companies also said that changes to the corporate tax rate would have little effect on their operations. They said the corporate tax rate should have been lowered to 13-14%.

The corporate tax rate will be raised to 19% from 16%, but the 4% “solidarity tax” will be eliminated, resulting in an overall one-percentage-point fall in the tax rate for company profit.

About 65% of companies said the lower labor taxes would have a negligible effect on reducing the shadow economy and 68% said it would not affect their competitiveness. About 41.5% said the changes would lower their losses, 24% said they would increase profits and 22% said they would allow more spending on investments. One-sixth said they would lay off fewer staff as a result, and the same proportion said the tax changes would free up more resources for pay rises.

About 67% said the change in the corporate tax rate and the elimination of the solidarity tax would have no effect on business, while 24% said it would hurt business and 11% said business would improve as a result. (MTI-ECONEWS)