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Finance Minister Tibor Draskovics said revenue-based local industrial tax will have to be eliminated on the long run.

“The government can take just as much risk in its tax reform that does not jeopardize the balance of economic processes,” said Tibor Draskovics at a conference organized by the National Federation of Employers and Manufacturers (Magyosz).

Draskovics said at the event that the revenue-based local industrial tax will have to be terminated on the long run, and as a first step, it should be reduced and changed to be profit based in 2006. Draskovics added that the flat healthcare tax is also likely to be abolished at the end of 2006.

Regarding corporate taxes, the finance minister said the corporate tax rate can be reduced to 10% and later to half of the currently 16% in the case of companies earning not more than HUF 10 million in profit. He added that the simplified entrepreneurial tax (EVA) could be extended to companies with higher operational costs than the companies currently allowed to choose the EVA scheme.

Also speaking at the event, Fidesz MP Mihály Varga, a former finance minister in the previous Fidesz-led coalition government, said his party’s proposal would impose lower tax burden on businesses. In a pessimistic scenario, Fidesz’ plan would result in a loss of HUF 300 billion in revenues from the central budget, but the loss could also turn into gains in a more optimistic scenario. Varga said a five percentage point cut in tax burdens associated with employment could result in a HUF 130 billion tax cut for entrepreneurs, and abolishing the flat healthcare tax would save them HUF 56 billion. Fidesz also proposes cutting corporate taxes by half for companies with less than HUF 100 million in revenues, Varga added.

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