Fidesz proposals on an employment-friendly tax cut package

Dátum: 2005-03-08 11:09:00, eredeti URL: http://archiv.fidesz.hu/index.php?Cikk=35050
KCMDB-be feltöltve: 2024-05-04 21:27:37.133700, Feltöltő: fidesz_hu_scraper_v2

Action speaks louder than words:

Fidesz proposals on an employment-friendly tax cut package

Introduction

The last two years have been a period of tax increases in Hungary. Since 2003, the socialist-liberal government has burdened citizens with an extra sum of HUF 550 billion (levied each year) in taxes, a situation that did not change much with the replacement of the prime minister. The Hungarian Chamber of Commerce and Industry calculates that an additional HUF 100 billion was put on Hungarian enterprises from 2004 to 2005 in the form of extra taxes, charges and contributions. In the last three years we have witnessed:

- some 33 counts of increased taxes (e.g. VAT, levies)

- extra taxes and contributions (e.g. green tax and entrepreneurs' contributon)

- scrapped tax breaks (e.g. on housing loan redemption)

- increased state service charges

While the Gyurcsány-government tells Hungarians that they live in "great welfare", the last three years have in fact brought insecurity, increased prices and unemployment and vulnerability for enterprises and families. Hungary has lost its pole position in the region in terms of macroeconomic indicators and the euro convergency criteria, and the real wages decreased by 1 % in 2004, a phenomenon unmatched in the European Union. However, Hungary has gained a pole position in the region in terms of the overall tax burden in the percent of the GDP, as well as in social security charges on employers and employees alike.

We need a new, employment-friendly tax policy

The prime minister has recently admitted that tax cuts can indeed be executed mid-year, and ensuing budget losses are usually compensated by a newly generated increase in state revenues. In the past 2 and a half wears, we have heard enough plans and talk on behalf of the government about the tax decrease but no action yet. On the contrary, we experienced tax increase. However, Fidesz considers actions louder than words and has therefore introduced a comprehensive tax cut package in Parliament to help enterprises, families and pensioners.

Tax cuts for the security of jobs and enterprises

Among others, this part of the package includes the reduction of social security contribution from 29 to 24 percent and the repeal of employers' healthcare contribution. (Between 1998 and 2002, the Fidesz-government reduced the social security contribution by 10 percent.) Also, in order to help small and medium-sized enterprises, the package provides for the reduction of corporate income tax from 16 to 8 percent for companies with a yearly net income under HUF 100 million. A doubled upper threshold of yearly income in the Simplified Taxing Scheme (from 25 to 50 million) would serve the same purpose. In addition, 100 percent of the controversial local business tax could be extracted from the corporate income tax base.

Tax cuts for the security of families and pensioners

The principal task in this arena is making radical cuts in the VAT rates on goods and services. Instead of the current 5-15-25 percent system, Fidesz proposes a 5-10-19 percent pattern. This would greatly enhance Hungary's competitiveness and provide for a compensation of budget losses which result from a redirection of declared goods from Hungary by many corporations, as well as widespread "shopping" by Hungarians in neighbouring countries. Similarly, Fidesz proposes cuts in the VAT content of utility prices, from 25 to 10 percent in the case of electricity and 15 to 10 percent in the case of gas. Other necessary measures include the restoration of the upper tax break limit of HUF 240,000 for housing loan redemptions. Also, parents should be provided a 30-percent tax break on schooling expenses for their children attending elementary and secondary education.

Action instead of talk

If the prime minister is honest about his intentions, the government has no reason not to support the new employment-friendly tax cut package elaborated by Fidesz. Parliament could approve the elements of this package by June 2005, thus making the effects felt as early as this year. The Fidesz tax cut package would:

- enhance the competitiveness of the enterprises and of Hungary as a whole,

- create up to 40,000 new jobs as early as this year,

- leave about HUF 300 billion at the taxpayers in 2005. The resulting budget deficit would be compensated by increased state revenues generated by the tax cuts, as demonstrated by international examples.

Budapest, 21 February 2005