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Hungary's Government's Spokesman Szijjarto Clarifies Income Tax Plans

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Hungary's Government's Spokesman Szijjarto Clarifies Income Tax Plans
"The government does not have the slightest intention of returning to progressive taxation and will stick to a flat tax, prime ministerial spokesman Peter Szijjarto said at the end of last week, as he sought to clarify a Tuesday announcement by the Economy Ministry.

His words came a day after the minister announced a temporary tax on incomes above Ft 202,000 per month, which most analysts and the opposition interpreted as an abandonment of the flat tax.

Szijjarto told reporters that the super-gross scheme – in which taxable income is increased by the 27% social security contribution payable by employers – will be phased out for people with a monthly gross wage of less than Ft 202,000.

For people with higher monthly earnings, the practice will continue, to be phased out in two steps by 2013.

The scrapping of the super-gross for lower incomes will cost the budget Ft 350 billion, but this will be offset by eliminating tax benefits of every kind, Magyar Nemzet writes.

The government plans to compensate employees who lose in the new flat tax regime from the revenues retained by keeping the super-gross tax in place until 2013, Szijjarto said.

Even this will be phased out, as only half of the social security contribution paid by employers on incomes above Ft 202,000 a month will be taxed in 2012, and none at all in 2013.

These comments are at variance with other economy ministry statements, as Economy Minister Gyorgy Matolcsy said last Friday that the super-gross scheme would be abolished in 2012.

Matolcsy will submit details on his tax plans to the cabinet next Wednesday, Szijjarto said. The ministry stressed in its Tuesday announcement that those with a monthly income of Ft 202,000 or more will not be worse off."

Source: Hungary Around the Clock

This news item is one of many published daily by HATC, a premier subscription news service which distributes English-language info about Hungary via email or fax. For a free trial of HATC follow this link and click on 'Free Trial Subscription'.