Are you sure?

Tax changes to have practically no effect on 2009, 2010 budgets

Tax changes announced by Prime Minister Ferenc Gyurcsány will essentially have a “break-even” effect from the point of view of the budget in both 2009 and 2010, Finance Minister Janos Veres said in a television interview.

An important element of the planned changes is to see all employees have legally declared income, Veres said.

The government wants to raise the tax rate on the lower personal income tax bracket from 18% to 19% from July 1, 2009, he said. At the same time, it will raise the threshold for the lower bracket from HUF 1.7 million to HUF 2.2 million. The threshold will be raised again to HUF 3 million from the start of 2010. The rate for the upper personal income tax bracket will be raised from 36% to 38% and the 4% “solidarity tax” will be scrapped.

The payroll tax will be reduced by five percentage points to 27%.

The main VAT rate will be raised from 20% to 23% on July 1. The measure is expected to raise inflation by 2.1 percentage points if the makeup of consumption remains unchanged.

If the economy contracts more than expected and if inflation is lower than the targeted 4.5%, the government will introduce more austerity measures to achieve the 2.6%-of-GDP deficit target, Veres said.

Reacting to an IMF projection that puts the economic contraction in Hungary at 3.0%-3.5%, Veres said, “We are counting on a 3.3% fall in this year's GDP.” (MTI – Econews)