Big gap between corporate tax revenue target and actual revenues

Just over half of the revenue targeted from corporate tax in this year’s budget is expected to be collected, business daily Vilaggazdasag said on Monday.

While the budget act envisaged close to HUF 610bn in revenue from the now 19pc corporate tax, the Budget Council’s analysis shows actual revenues could remain below HUF 350bn, the paper said. This is partly due to the fact that tax refunds due after 2009 trim around HUF 75bn from revenues. This amount is missing this from a cash-flow point of view, while it is a burden on last year’s budget from the point of view of ESA accounting, thus, it will not increase the 2010 ESA deficit (it would account for around 0.3pc of the GDP).

Corporate tax revenues, however, will remain well below the target even without the tax reimbursements. While the original budget envisaged a major increase in the tax base this year from both its level in 2008 and in 2009, this will definitely not materialise. Pre-tax profit and the corporate tax base did not increase last year from 2008, in fact, there was a slight decline. The reason for concern this year is that while 55pc of the revenue targeted for the entire year was collected in the first month of 2009, this figure now stands at 20pc – compared to a now definitely unrealistic target of close to HUF 610bn, the paper said.