Budapest - Hungary's parliament approved on Monday a package of tax reforms aimed at stimulating the economy and increasing participation in the labour market.

Before the vote, interim Prime Minister Gordon Bajnai said the outcome of this last day of the spring parliamentary session would determine Hungary's fate far into the future.

Bajnai said parliament's decision would show Europe and the world that Hungary is "capable of long-term crisis management" not just "short-term interventions for campaign purposes," the local news agency MTI reported.

A key measure in the package is a threefold raise in the threshold of the upper income tax bracket to 5 million forints (25,582 dollars) next year, significantly increasing the take-home pay of an average Hungarian wage earner.

The bar will be raised again in 2011 to 15 million forints.

The lower income tax bracket will be 17 per cent and the upper bracket 32 per cent, both slightly lower than current levels, when the changes come into force in January.

These measures are aimed not only at stimulating the economy, but also at increasing participation in the legal job market.

In Hungary, many take part of their wages in cash or kind, and the black market could be equivalent to as much as 20 per cent of Hungary's official gross domestic product, according to recent official estimates.

Excise duty on petrol, diesel, alcohol and cigarettes was also hiked, as well as the tax on energy.

Another bill passed into law on Monday was the introduction of a property tax on homes valued at over 30 million forints.

An annual levy of between 0.25 and 0.5 per cent of the value of a property will be levied annually, depending on market value.

The government has already pushed through legislation to cut employer's payroll tax, with the cuts to be funded in part by hiking the rate of VAT from 20 to 25 per cent in July.

Along with swingeing cuts to pensions and public sector pay, these measures all reflect conditions laid down by the International Monetary Fund, the European Union and the World Bank, which bailed Hungary out with a joint 25-billion-dollar rescue loan in October.(dpa)