TAX NEWS - June 2010

Tax experts warn grey labor big problem in Hungary

Grey labour is still a big problem in Hungary, tax experts told Wednesday's Magyar Nemzet daily.

In 2008, 1.1 million people were registered on as minimum-wage earners; around 700,000, however, supplemented their basic income and failed to declare tax on it, Szabolcs Vamosi-Nagy, a former senior official of the National Tax Office, said.

He said the situation today has changed little.

Scrapping taxes on the minimum wage in 2002 was a "grave mistake," he added.

Tamas Locsei, of PriceWaterHouseCoopers, said that, in addition to people who take advantage of the minimum wage, 200,000-300,000 regular workers avoid paying any tax at all.

The most effective way of combating illegal employment is to cut taxes, tighten tax authority inspection, set up a tax police and phase in a tax on minimum the wage, Locsei told the paper.

The Fidesz centre-right government has pledged to introduce a flat 16 percent personal income tax from next year and tax the minimum wage.