Representatives of employees and employers on Monday agreed with most of the prime minister’s proposed tax, welfare and pension changes, but raised concerns about the planned VAT hike.
Speaking in parliament on Monday, Prime Minister Ferenc Gyurcsany outlined raising the lower personal income tax bracket from 18 to 19 percent while widening its base, and raising the upper tax bracket from 36 to 38 percent. He said VAT would be raised from 20 to 23 percent, to offset a 5 percentage-point cut in payroll taxes to 27 percent.
National Association of Trade Unions (MSZOSZ) chairman Peter Pataky said unions agreed with the need for tax changes, but raising the lower tax bracket could be harmful for low-income earners. He added that a VAT hike to 23 percent on all items, including food, would also hurt the poorest. Instead, he said, MSZOSZ has proposed a lower, 17 percent, VAT bracket for food.
Head of LIGA trade unions Istvan Gasko said the desired rise in employment levels could be reached by reducing the black economy by 30-40 percent.
Gyurcsany said the planned changes were meant to help raise employment levels from a currently low 57 percent to 65-70 percent.
Ferenc David, head of the National Alliance of Employers and Entrepreneurs (VOSZ) welcomed the planned cut in tax on labour, but said the VAT rise of 3 percentage points could strain the catering and tourism sectors.