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A special committee set up to reform Hungary’s current tax system will propose introducing two-bracket systems in corporate profit tax and in the simplified entrepreneurial tax as of 2006. Plans include a total restructuring of municipal financing as of 2007, said László Akar, chairman of the committee.

While keeping the current 15% simplified entrepreneurial tax (EVA), the committee suggests to introduce a new, lower bracket – at 10% – for companies with operating costs lower than 40% of their revenues within the EVA scheme. Likewise the currently flat corporate profit tax will be taxed in two brackets. Corporate profits for up to HUF 5 million will be taxed at 10%, while profits exceeding the limit will be taxed at 16%, which is the currently applied tax rate on all company profits.

Likewise, personal income tax will be levied in two groups. People making HUF 1.8 million a year will pay 18%, while those making more will be levied 38%.
The committee proposes significant changes in the financing of municipalities, as it also plans to abolish local industrial tax, which is levied based on revenues and serve as direct income to local municipalities.
 
The changes will allow municipalities to impose special taxes on personal incomes starting 2007. Chairman Akar stressed that the currently unveiled changes are proposals only, and are far from becoming a draft law.

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