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Proportional taxation, job creation and smaller bureaucracy aims of gov't economic action plan

The government's second economic action plan aims to make the distribution of the tax burden proportional, create jobs and reduce bureaucracy, Prime Minister Viktor Orbán said in Parliament on Monday.

Orbán was speaking just a few days after MPs of governing Fidesz submitted bills to Parliament levying "crisis taxes" on certain business sectors and introducing a flat-rate personal income tax. The changes are part of the government's second economic action plan unveiled by Orbán on Wednesday.

The Hungarian government will merge state-owned regional Volan bus companies and state railways MÁV into a joint holding company, and will establish a structure for close cooperation with Budapest public transport company BKV, Prime Minister Viktor Orbán told Parliament.

The government will start talks with every big local council on the future of public services provided by them, Orbán said, tackling another sore point, namely the financial situation of the largest municipalities.

Speaking about the crisis taxes, which are to raise an annual HUF 161bn from energy suppliers, telecommunications companies and retail chains in 2010-2012, Orbán said the sectors were being asked to do their part to bring the country out of the crisis. The taxes will not endanger the companies that pay them nor will they put jobs at risk, he added.

Orbán noted that the previous government had signed bad contracts with energy sector companies just days before the national elections in the spring that took HUF 178 billion from taxpayers. He did not reveal any further details.

Orbán said the changes to the tax system aimed to make taxes proportional. "Somebody making ten times as much will pay ten times more," he said. Bills submitted over the weekend reveal that the government plans to introduce a flat 16% rate personal income tax next year.

The government will immediately suspend public-private partnerships (PPPs) and review ongoing investments made under the scheme, he said. Private interests have squeezed out public interests in PPPs, he added.

Everybody who is a member of the private pension system will be given the choice of leaving for the state pension system, Orbán said. The state system is the only one that can guarantee pensions as the state alone can survive a crisis, he added. He sharply criticised the 1997 pension reform, introducing a compulsory second tier of private pension funds thus "forcing people to take risk".

Orbaá announced already last Wednesday that the second action plan will suspend payments to private pension funds for 14 months.

Spending on state administration should be cut by at least 5%, the Prime Minister said on Monday.

A restructuring of the healthcare, education and public administration systems cannot be put off, Orbán said.

In the interest of raising the workforce participation rate, Orbán said the government would introduce a vocational educational system based on the German model and reduce social contributions by women working part-time from 27% to 20%. It will also expand the scope of working capital credit available to farmers who will be also eligible for the preferential-term Széchenyi cards in the future.

The action plan elminates a number of bureaucratic hurdles for businesses, Orbán said, noting that the number of organisations evaluating tenders will be cut by 20% and the number of supplements required at tenders will be cut by 10%.

The government will extend the maximum period home savings are eligible for subsidies from 8 years to 10, he said. It will also raise the limit on bridging loans to 75% of the value of the home, he added. (MTI-Econews)