Hungarian people have made tremendous efforts to end the Excessive Deficit procedure against the country, but the result “shall be upheld and protected”, and that is the reason the Government has submitted new measures in Parliament, Government Spokesperson András Giró-Szász said, and Minister for National Economy Mihály Varga announced the concrete measures.

At the press conference, the Government Spokesperson said that with exiting the Excessive Deficit Procedure, the current Government is ending an almost decade-long fight brought about by missteps of previous Socialist Governments. András Giró-Szász added that certain economic processes - such as low inflation - are beneficial for citizens, but this at the same time can reduce formerly envisaged state revenues, and that is happening to Hungary right now. In order to avoid recurring fiscal deficit increases which have plagued, for example, Malta, the Government is introducing further corrective measures, he said.

The Minister for National Economy informed the audience that the Government is proposing to increase the financial transaction duty from the current 0.3 percent to 0.6 percent for cash withdrawals and abolish the 6 000 forint cap for such transactions. The duty for money transfers will be up from the current 0.2 percent to 0.3 percent, while the upper limit of HUF 6000 will be left unchanged. He also added that these steps were discussed and endorsed together with the Hungarian Banking Association over the weekend.

Among additional measures, the Minister mentioned that the telecom tax paid by enterprises will increase from the current 2 forints to 3 forints per minute or per SMS/MMS, while the upper limit for this levy will also be raised from HUF 2500 to HUF 5000. Mihály Varga emphasized that higher telecom taxes will only be payable by businesses and not by private persons. Mining fees are also about to increase from 12 percent to 16 percent.The Government also recommends the levying of healthcare contributions of 6 percent on interest incomes, similarly to the levy on capital gains.

Among the proposals is a state guarantee to be granted for credit taken out by hauliers with relation to the construction of the new electronic toll collection system.

Amendments regarding the freezing of funds and changes on the financing of large investment projects will also be incorporated into the amendment of the Budget Act. These will enable the setting up of an investment fund to manage certain expenditures, such as stadium constructions or the rebuilding of Kossuth Square.

As the Minister said, the objective of the measures is to help Hungary exit the EDP once and for all, without a future reopening of the case, as it happened against Malta. The other reason is inflation outlook. The Government calculated with an inflation rate of 5.2 percent at the time when the 2013 Budget Act was adopted, and that was revised down to 3.1 percent in the Convergence Programme. The latest processes, however, signal that the pace of the deterioration of forint’s purchasing power will be even slower this year. The rate of inflation has not been this low for forty years, he added. This is a factor which households can profit from, but it cuts budget revenues. He reminded the audience that when the transaction duty was announced, the Government signalled that in case the revenues from the levy will be below the amount expected of it, the Government may increase its rate.

Mihály Varga said that the Government has envisaged revenues of HUF 301bn for this year, but the budget received only HUF 52bn until the end of May: that means that instead of the pro rata temporis 42 percent, only 18 percent of total was paid and that warrants the change of tax rate. Responding to a question, the Minister said that breakneck competition will likely prevent banks from passing higher costs on to consumers. Speaking about the advertisement tax, Mihály Varga said that no decision was made as yet, but the revenues expected from this levy will be included in the budget act amendment.

The Minister also informed that - provided they are adopted by the National Assembly - the Government’s new tax measures will be effective as of 1 August.

(Ministry for National Economy)