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UPDATE - Govt supports proposal to scrap simplified business tax

The government supports a proposal by National Economy Minister Gyorgy Matolcsy to eliminate the Simplified Business Tax from the start of next year, but Parliament will take the final decision on the matter, government spokesman Andras Giro-Szasz said at a press conference on Thursday.

Parliament's Audit and Budget Committee on Wednesday rejected a proposal by Laszlo Koszorus, an MP of governing Fidesz, to eliminate the Simplified Business Tax, also known by its Hungarian acronym "eva".

Fidesz MP Jozsef Dancso argued that eliminating the tax was a step that would affect many businesses. But deputy state secretary for tax affairs at the National Economy Ministry Adam Balog backed the proposal to scrap the tax.

MPs on the committee backed a proposal to raise the annual revenue cap on companies that can opt to pay eva from HUF 25m to HUF 30m as well as to increase the tax rate from 30pc to 35pc of revenue.

Companies that pay eva may not deduct any costs.

Daily Nepszabadsag said on Thursday that the government decided to scrap eva at a cabinet meeting on Wednesday. The paper did not cite any sources.

Fidesz parliamentary group leader Janos Lazar said in an interview on public radio early Wednesday that he thought eva should remain but the issue would have to be agreed on by MPs and the government. Fidesz MPs agreed to keep eva in place at a meeting in September, he added.

The tax generated revenue of HUF 86.5bn in January-September, the latest general government data from the National Economy Ministry show. It is expected to bring in HUF 180.1bn for the full year, according to a downward revised target approved by Parliament, practically level with the HUF 181.9bn eva generated in 2010.

Eva is expected to bring in revenue of HUF 179.1bn in 2012, HUF 187.7bn in 2013, HUF 197.8bn in 2014 and HUF 208.2bn in 2015, according to the 2012 budget bill.

Answering a question at a press conference on Thursday, Matolcsy said eva would lose its raison d'etre in 2013, when the full switch to the 16% flat-rate personal income tax system is introduced. No additional income tax systems can or need to be maintained, he added.