Flat-rate income tax to be enshrined in 2/3 laws, says Matolcsy

Budapest, June 3 (MTI) – Hungary’s government plans to enshrine measures including its new flat-rate personal income tax system in cardinal laws requiring two-thirds parliamentary majority, Economy Minister Gyorgy Matolcsy said on Friday.  

Matolcsy told the website www.fn.hu that key principles to be set in the laws include the tax system’s 16 percent flat-rate personal income tax and the tax regime’s commitment to supporting families with children. The law should cap the personal income tax rate at 16 percent, Matolcsy said, adding this was his opinion and the final decision rested with lawmakers.


Matolcsy said the flat-rate tax was a “huge success” because of its all time low-level as well as the fact that it has managed to separate economic efficiency aims from welfare considerations.


He said the effects of the main aim of the flat-rate tax, to increase competitiveness, could already be felt.


“Fresh data show the economy is growing, a decline in consumption has stopped and we are expecting to witness a turnaround in investments soon,” Matolcsy said, adding that long-term savings were growing and people were using more savings towards paying off debt.


Asked about government plans to create 300,000 jobs, and how this can be carried out, Matolcsy said the simultaneous conditions needed for job creation were economic growth, a rising investment rate and success in attracting foreign investment.


Matolcsy said the government would keep a tax on banks at half of its current level beyond 2012 when the tax on the telecom, retail and energy sectors is planned to be eliminated. He said no new plans for “crisis taxes” were on the table for after 2012.


In spite of the state’s recent repurchase of a 21.2 percent stake in Hungarian oil and gas firm MOL from Russia’s Surgutneftegas, Matolcsy said further nationalisation was not a key plank of any government strategy.


“The state has neither the money nor any inclination to implement economic strategies by raising state assets,” he said.


Matolcsy mentioned that if further MOL shares are found in private pension savings channelled into state funds last year, the state’s stake in Mol may rise to above 25 percent.


On the subject of the recent government measures aimed at helping troubled mortgage-payers, Matolcsy said the new national asset-management body, part of the scheme, is likely to be set up as a subsidiary of the Hungarian Development Bank (MFB) and will have 5 billion forints (EUR 18.66m) earmarked for buying the homes of defaulting householders in 2012.


The government will soon implement an agreement just sealed with the banking association on fixing repayments for Swiss-franc mortgages at 180 forints to the franc until 2014, as part of the scheme to prevent the evictions of families en masse. Matolcsy said proposals for fixing the franc rate were in a range of 150-199. He rejected the central bank’s criticism of the deal as creating “a feeling of false security” in mortgage payers, who after 2014, will have to revert to higher mortgage rates.


From 2015, mortgage repayments cannot be raised by more than 15 percent compared to the eased conditions, Matolcsy said.


“Everyone knows what they have to pay, so there is no false comfort,” he said.