June 30, 2005 - Volume XIII, Issue 26 Five-year tax reform plans By Kester Eddy
THE Hungarian Government is to introduce a package of tax reforms that it says will benefit the public and business by some Ft300 billion ($1.5bn) next year, with total savings over the next five years coming to almost Ft 1.1 trillion ($5.3bn). As the centerpiece of the changes, announced by Prime Minister Ferenc Gyurcsány on Monday, the top rate of AFA -value added tax - will be cut from the current 25% to 20% from next January. In another major change, the higher rate of personal income tax will be trimmed from 38% to 36%, and the threshold salary to which it applies will raised to Ft3m ($14,6780) by 2010, double the present level of Ft1.5m ($7,340). Other changes will see the minimum wage almost doubled to Ft100,000 ($490) by 2010, reduced social security payments and profit tax cut from 16% to 10% for small businesses. Gyurcsány also promised to make the much criticized local business tax fully tax-deductible from next year, before replacing it from 2008 with a new kind of levy. Business associations have long criticized local business tax as unjust, since it is levied on revenues rather than profit. Against these cuts, a 10% tax will be imposed from 2007 on both capital gains on shares sold on the stock exchange and on interest from "large" bank deposits, the prime minister said. While the government championed the changes as fairer, more predictable and attractive to foreign investment, János Áder, Fidesz parliamentary leader, said the changes will principally benefit higher earners. However, Fidesz agreed with the cuts in VAT, Áder said. The initial reception in the business community was cautious. "I have only just read one report, and a lot will depend on the details," said Les Nemethy, President of the American Chamber of Commerce in Hungary. "I will enjoy paying 5% less in the stores, but I do not see this as really improving the country's competitiveness. Rather than reducing personal income tax, it's [reducing] the employment taxes that is really needed. They have not capped social security contributions, for example." Domestic businesses also warned that raising the minimum wage risked the loss of more jobs in such areas as the clothing and footwear sectors to lower cost countries such as Romania. However, the main cause for concern was the effect of the tax reductions on state revenues and the budget deficit, with several economists saying the changes, if implemented, further risk delaying Hungary's adoption of the Euro, targeted for 2010. http://www.budapestsun.com/full_story.asp?ArticleId= {6132EF058A044692A03F233BB8ECEC72}&From=News *** sustineti [romania_eu_list] prin 1% din impozitul pe 2005 - detalii la http://www.europe.org.ro/euroatlantic_club/unulasuta.php *** Yahoo! Groups Links <*> To visit your group on the web, go to: http://groups.yahoo.com/group/romania_eu_list/ <*> To unsubscribe from this group, send an email to: [EMAIL PROTECTED] <*> Your use of Yahoo! Groups is subject to: http://docs.yahoo.com/info/terms/
