Hungary to introduce real estate tax in 2008, tax reform in 2009

The most important things will be the details about these measures, which are still sketchy. Goldman Sachs said on Tuesday that the real estate tax appeared to be a watered-down compared to original plans.

Hungary to implement unified property tax as of 2008, major tax reform to start in 2009

The Finance Ministry said that there would be a new real estate tax from January 2008, but it would be the decision of the local government whether they levy it or what exceptions they apply.

The tax will replace five different other taxes on property. The revenues would stay at the local level.

The Finance Ministry also said that there would be a comprehensive tax reform from 2009, but the details will only be worked out later this year. Already in 2008 there would be smaller tax changes, mainly aimed at fighting the black economy.

“It seems that the real estate tax is a watered-down compared to original plans: it will not be a source of revenue for the central budget (previously the government talked about an extra revenue of about HUF 100 billion), although there was not much detail about it yet," István Zsoldos of Goldman Sachs commented.

That is also true for the 2009 tax reform, where the government does not have the plans yet.

The analyst does not expect large changes to the overall tax take (thinking that the government will not blow up the budget deficit the same way it did going into the 2009 election), rather a rearrangement/simplification of taxes.

“But the closeness of the 2010 election will mean that there will be a temptation to slightly reduce the overall tax burden on households at least," Zsoldos concluded.