The government will not implement a radical tax reform next year as it was earlier planned, said finance minister Janos Veres at a meeting organised by the American chamber of commerce. He substantiated that stance with the lack of both social and political consensus on the issue. We recall that PM Gyurcsany had earlier urged for significant changes in the tax system and it was even rumoured that lack of bolder proposals was one of the reasons for the recent dismissal of former FinMin Tibor Draskovics. Veres confirmed that the main reforms would relate to the VAT rates stressing that he did not see rationale behind cutting the top 25% rate by just 1 or 2pps.
We note that according to earlier press reports it will be reduced below 20%. Veres also said that the corporate tax would remain unchanged in 2006 at its current level of 16%, while the local business tax might be restructured but it could not be abolished. In fact scrapping the latter was one of the main bullets in Gyurcsany's pledges for tax reforms.
Noteworthy, Veres said that the coalition partners were close to consensus on widening the financing base for the health insurance fund, which in turn translates to reduction in contributions in the next years.