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Audi To Temporarily Halt Investments In Hungary

Objects to 4% "solidarity tax" on profitable companies.

After the left-wing government introduced a 4% "solidarity tax" on profitable companies Audi will temporarily suspend new investments in Hungary, Audi spokeswoman Monika Czechmeister said Oct. 20.

The German carmaker, Hungary's biggest exporter, will enjoy a tax exemption until 2011 but the government said all companies operating in Hungary will have to pay a 5% "solidarity tax," aimed at helping the state rein in a high public deficit. The tax took effect in September and is just one item in a package of tax hikes and spending cuts that the government hopes will yield savings of 350 billion forint (US$ 1.68 billion). this year and one trillion forint in 2007.

The carmaker's factory in Gyor, in western Hungary, is the country's largest exporter and one of the biggest manufacturers of motors worldwide, churning out 1.7 million pieces last year. Czechmeister said Audi, which employs 5,200 workers in Hungary, has invested three billion euros in the country since operations started in 1993

Economy Ministry spokesman Gergely Abraham said the Audi management had specifically talked about the possibility of choosing another country for an upcoming investment worth 160 billion forint.

The Hungarian government is meanwhile struggling to rein in the highest deficit in the EU, forecast to reach 10.1% of gross domestic product (GDP) this year. Prime Minister Ferenc Gyurcsany has introduced an austerity program designed to cut the deficit to 6.8% of GDP next year and 3.2% by 2009, in view of adopting the euro between 2011 and 2013.

Copyright Agence France-Presse, 2006

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