Protests as Hungary Raises Taxes on Small Businesses

It took only 24 hours for the Hungarian government to pass a bill that makes a simplified tax regime ineligible for hundreds of thousands of people.

The Small Taxpayers' Itemised Tax, KATA, was the most popular choice for almost 400,000 small businesses and self-employed, due to its simple administration and low tax rate.

KATA will in future only be available to full-time self-employed individuals providing services or selling products to individuals.

As parliament was discussing the bill on Tuesday, demonstrators blocked a bridge and slowed traffic on another over the Danube in Budapest. There were protests in other cities as well.

It was the first significant show of disquiet since Viktor Orban's Fidesz party was re-elected with a supermajority in April.

However, the government is facing serious economic challenges, with inflation at its highest level in 20 years, the currency plunging to record lows in recent weeks and EU funds in limbo amid an ongoing dispute with the EU over democratic standards.

Reacting to Tuesday's demonstrations, Secretary of State for Parliamentary Affairs and Taxation Andras Tallai said the new law would help combat abuse of the system and the "grey" economy.

But opposition parties criticised the proposal as a "brutal fiscal restriction", accusing the government of "conducting a nuclear war against mosquitos".

Laszlo Zara, a tax adviser, said it would mean a huge overall tax rise.

"Small businesses will not be able to reach their previous income levels, forcing them to raise prices and cause inflation," he told Reuters.

The protests continue on Wednesday after one of the opposition parties called for a demonstration close to the parliament. The new rules are set to...