After having considered proposals made during expert negotiations, the State Audit Office of Hungary and the Fiscal Council tabled amendments regarding the Job Protection Action Plan and the bill on the itemized tax for enterprises with a small tax base and small enterprise tax. The submitted proposals have been approved by the Council and thus the National Assembly can vote on the amendments.

Since the action plan was announced the Government has held several consultations with professional organizations involved in this issue. Discussions were held with the Hungarian Enterprise Development Council, Council of Investors, every major Hungarian tax consultancy as well as the Standing Consultative Forum of the Private Sector which also includes advocacy groups of employees. At these meetings both employers and employees approved that the Government will introduce special tax allowances aimed at preserving and creating jobs.

The selection of target groups has been supported at the aforementioned forums as participants all agreed that job prospects for career-starters, elderly people, unskilled people and mothers with young children are the most unfavourable. Consequently, if taxes are lower chances for keeping or getting a job are distinctly higher.

Consultations on the Job Protection Action Plan were concluded on 19 September 2012. The Government has assessed tabled proposals and decided about supported modifications. Social contribution tax allowance will be extended, thus employees with career starters below the age of 25 will save a substantial amount of money as, according to the bill, instead of the current tax rate of 14%, in the initial two years tax liabilities payable by the employer will come to zero. A modified element is that receipts issued by entrepreneurs who opt for paying the itemized tax for enterprises with a small tax base can be deducted as expenditures by other taxpayers. A social element has also been added: enterprises are not obliged to pay the aforementioned tax when the taxpayer is unfit for work for at least 30 days and receives sick pay.

The Government also favours several modifications regarding small enterprise tax. Elements such as those enabling the accounting of loss or investment incentives have been included. In addition, the calculation of business tax will be significantly simplified. The National Assembly is expected to vote on the amendments tabled so far, and the final vote is anticipated to be cast on 1 October 2012.

The Government made a decision this summer that in order to protect and create jobs it introduces further effective tax policy measures. In order to achieve a breakthrough in employment, the Government elaborated a transparent and simple programme for employers and enterprises which will result in significant tax cuts.

(Ministry for National Economy)