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Hungary: FinMin rejects employers’ call for bigger cuts in payroll tax

Finance Minister János Veres rejected employers’ proposals for bigger cuts in payroll tax because of a lack of resources at a meeting of the National Interest Coordination Council (OET) on Tuesday.

“There are still not the (budget) resources for the bigger contribution reductions proposed by the (OET),” Veres said. Though the government expects a crackdown on the shadow economy to bring in significant surplus budget revenue, this will only be seen in 2010, he added.

The government’s tax plan will save taxpayers Ft 145 billion -- Ft 100 billion for businesses and Ft 45 billion for private citizens, Veres said. A gross tax reduction of Ft 260 billion will be made possible by a Ft 145 billion cut in expenditures, to be made at the ministerial level, as well as by Ft 115 billion in additional budget revenue from tax increases and other tax measures. Hungary must not miss its 3.2%-of-GDP government deficit target for 2009, he added.

Employers argued at the meeting that the Ft 100 billion tax cut for companies would not be enough to spur growth. Both employers and unions harshly criticized the government’s plans to introduce an 11% contribution on some non-wage compensation, such as hot meal vouchers.

Union association head Péter Pataky said the measure would put catering industry jobs in jeopardy. Employers association head Ferenc David said that levying the contribution on hot meals would cost businesses an extra HUF 20 billion. It also may make the upcoming wage talks difficult, he noted.

Veres said that if the government did not introduce the 11% contribution on non-wage compensation, it could not count on the resulting Ft 55 billion in budget revenue and it would not be able to lower payroll taxes by five percentage points as planned. David said the government’s plan to no longer allow companies to write off the local business tax from the corporate tax base would cost them Ft 30 billion. (MTI-Econews)