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PM confirms flat-rate tax to be introduced from January

Hungary will gradually introduce a flat-rate personal income tax from January 2011, Prime Minister Orbán said in a television interview late Monday, dismissing reports the government wants to delay the introduction.

Orbán announced the introduction of the flat-rate 16pc personal income tax early in June as part of a government action plan.

How many years the tax will take to introduce is another question, Orbán said on Monday.

The new tax, to be linked to family subsidies, "will have the lowest rate ever", Orbán said. It is "expected to make the Hungarian economy the most competitive in Central Europe....or at least be a big step in that direction," he said.

The government will announce details of the new Széchenyi Plan -- a scheme to support SMEs -- at a business forum on Wednesday, Orbán said.

Speaking about an extraordinary bank levy that was a point of contention at recent talks with the IMF and EU, Orbán said the government had to introduce the tax to meet its commitment for a 3.8%-of-GDP deficit target for 2010. Hungary has an obligation to the IMF to meet the target, but the country has a free hand in determining how to deliver that target, he added.

The talks with the IMF and the EU on the conditions for Hungary's financial support package were suspended to give the government more time to clarify open questions. National Economy Minister György Matolcsy said the delegations did not like the bank levy, but added that the bank levy would ensure Hungary meets its deficit target for 2010.

"In October, [EU prime ministers] will agree on when the 27 countries have to bring down their budget deficits to the expected 3% [of GDP]," Orbán said. "That [date] will apply to every country, and if we keep to that, if we can swim together with the others, then we won't need any extra safety belt," he added. (MTI-ECONEWS)