Hungary’s Parliament on Monday approved tax changes initiated by Gordon Bajnai’s crisis-management government. Following the endorsement of the separate amendment motions on Monday, final voting on the government’s tax and pension package is scheduled for Monday of next week.
As was earlier planned, the general VAT rate will rise from 20% to 25% from July and a preferential 18% rate will be introduced for bakery and dairy products and district heating.
The reduced VAT rate for district heating will come into force one month later, in August. MPs also approved a reduction of employer pay-roll taxes from 32% to 27% up to a monthly gross wage of HUF 143,000, or double the minimum wage.
MPs also voted to retroactively increase the lower income tax bracket from HUF 1.7 million to HUF 1.9 million from the start of this year. The 4% “solidarity tax” on high-earning private individuals would remain in place until the end of 2010.
Compensation for sick leave will be reduced by 10 percentage points from 80% to 70% for the first 15 days, from 70% to 60% afterward and from 60% to 50% for those employed for less than two years.
Proposals for further tax changes that the Bajnai government plans to introduce only next year were dropped from the current package of motions and are expected to be presented to parliament on May 22 and approved before the summer recess
Before accepting his nomination, Bajnai required socialist and liberal MPs to sign a political declaration committing them to support his program, indicating that he would resign if his economic package were diluted in the course of legislative procedure. (MTI-Econews)