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Hungary makes R&D deductible for new tax

Hungary's government decided to allow businesses to deduct research and development expenses when calculating a new 4% „solidarity tax,” lowering the impact of its austerity measures on corporations.

The decision will cut the expected revenue from the tax by about Ft 5 billion (€17.4 million) from an expected Ft 170 billion, government spokeswoman Emese Danks said at a press conference in Budapest yesterday. „You have to understand the increase in income we are expecting from this,” she said. „It increases interest in innovation. This will create more opportunity in work, which will bring the government more tax revenue.” The government announced the solidarity tax last June as part of austerity measures designed to tame Hungary's budget deficit, forecast to reach 10.1% of gross domestic product this year.

The European Union won't allow Hungary to adopt the euro as its currency until it gets its finances under control. Hungary's government made the decision following complaints from the country's largest exporter, Volkswagen AG's Audi unit. The luxury carmaker had threatened to stop spending in Hungary because of the new tax. Businesses will use the deduction to calculate both the 4% solidarity tax and the 16% corporate tax, Danks said. (Bloomberg)