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Hungary: Unified flat tax rate accessible in 2009?

After conciliation with representatives of the economy sector, former coalition member SzDSz party created a tax reduction program, said chair János Kóka at a press conference Tuesday.

In the course of three years, Ft 1,000 billion of tax could be reduced: 2% of the GDP in 2009 (representing approximately Ft 500 billion), then 1% of the GDP both in 2010 and 2011 (representing Ft 250 billion in each year). SzDSz recommends the introduction of a unified flat tax rate (20%) in 2009, which is to be reduced to 19% in 2010 and 18% in 2011.

The economy policy should maintain the deficit outlined in the convergence program. In order to achieve this, the so-called solidarity taxes - previously introduced to create a budget equilibrium - should be abolished. At the same time tax base should be widened and the system of taxation simplified, according to SzDSz. The surplus derives from a simpler tax system, reduction of state administration costs, and stricter tax checking, should be placed in a tax reform fund financing the reduction of public debt and taxes. Through the downsizing of bureaucracy, transaction costs of enterprises could be reduced by Ft 700 billion, Kóka calculated.

The chair of SzDSz plans conciliation on this concept during the summer, and the parliament could adopt the Ft 1,000 billion tax reduction program in the autumn. After this, the government could create a recommendation on how to achieve the reduction. SzDSz already went through conciliation of the program with the governor of the monetary bank MNB, the association of tax consultants, and heads of regional chambers of industry and commerce, among others.

The rate of public costs in Hungary is 10% higher compared to national GDP than in similarly developed countries, Kóka added. This necessitates the redistribution of higher taxes, which should be changed. Also, employment has not expanded in the past seven years, and the taxes and fees burdening labor are the highest in Hungary out of the competing group of countries. Motorway network and secure business regulations create an edge for Hungary in the international competition, but tax bureaucracy and high tax rates hinder the country. These latter conditions could be changed through the tax reform program promoted by SzDSz, Kóka emphasized. (Gazdasági Rádió)