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Govt to fix flat-rate tax in law requiring two-thirds majority, Matolcsy says

Hungary's government wants to put the principles of the current 16pc flat-rate personal income tax and family support into a law which must be approved by a two-thirds majority in Parliament, National Economy Minister Gyorgy Matolcsy said in an interview with the online news portal fn.hu on Friday.

Mr Matolcsy was asked about a recent statement by Prime Minister Orban, who said that the regulations of the pension system, the tax system and budget management will be set by laws requiring a two-thirds majority.

The two-thirds majority law would state that Hungary has a flat-rate personal income tax system, though the percentage of the flat-rate tax could vary, Mr Matolcsy said. He added that fixing the current 16pc as a maximum would be a good solution. Preferences for children outside the tax system should be also passed by two-thirds legislation.

The National Asset Management Company, to be set up to purchase the homes of troubled borrowers, will probably operate as a subsidiary of the state-owned Hungarian Development Bank (MFB), and managing the assets could cost HUF 5bn in 2012, the economy minister said.

Setting up the asset management company is part of the Hungarian government's plan for troubled borrowers of foreign currency mortgages announced on Monday.

The National Asset Management Company will buy the properties of borrowers who are unable to service their debt from banks and would also build social housing for them as part of the new public work programmes, Mr Matolcsy said.

Real economy planning is the next stage for the Orban government, he said, citing the long-term structural projections of the French, German, Austrian or Finn models as examples. The successful countries of the European Union are doing real economy planning in addition to financial planning, these require cooperation between the government and the market, he said.

"...The Hungarian state has neither the money nor the inclination to carry out economic strategies through extending state ownership..", Mr Matolcsy said. He did not exclude further ownership acquisition by the state as a "theoretical possibility," though said that "this will not be the main form of planning the real economy."

The crisis taxes, levied on telecom, energy and retail companies last year, will be phased out from 2013. The extraordinary banking levy is, however, part of the structural programmes and the convergence plan as well, Mr Matolcsy said.

"In the case of financial institutions, if there is an EU solution, we will introduce that. If there is not one, we will maintain the current banking tax at half of its current size", the economy minister said.

The 2011 central budget targets HUF 161bn in tax from the crisis taxes on three sectors of the economy, and targets HUF 187bn from the banking levy, unchanged from 2010. The 2010 revenue stemming from the taxes was HUF 182bn and HUF 151bn, respectively.