At the focal point of taxation policy: securing financial balance, acknowledging aspiring entrepreneurs and reducing the weight of taxes on incomes parallel to increasing the role of value-added taxes on consumption and turnover.

Since the Government took to office it has been consistently pursuing the implementation of the taxation policy it had predefined: only such measures have been submitted to the National Assembly which gradually shift the emphasis of tax burden from levies on incomes to levies on consumption and turnover as well as on negative externalities (environmental and/or health-related taxes).

Small and medium-sized enterprises constitute the growth engine of Hungary’s economy and they play a key role in employment. Therefore, the Government has cut the rate of corporate tax to 10 percent in the case of these enterprises. The new Labour Code and the announced Job Protection Action Plan has increased employment flexibility and reduced the tax burden on labour for enterprises. Two new levies have also been introduced which may result in outstanding tax savings for small enterprises.

The instability resulting from the euro-zone crisis has also proven that the current economic status quo lacks firm fundamentals, and thus every country has to be prepared for sudden, unexpected and significant crisis situations. It has also been highlighted that long-term economic growth and stability must go hand-in-hand with financial stability. To this end, the Government has consolidated the budget and defined as an objective the significant reduction of general government debt.

In exchange for establishing financial stability, the Government has requested a greater contribution to burden sharing from banks and enterprises operating in highly profitable sectors and with a significant presence on the domestic market.

By its recent measures the Hungarian Government managed to set the Hungarian economy on the right track. One of the its first achievements is that Hungary’s budget deficit stayed below 3 percent in 2011 for first time since the EU accession, and the Government will insist on maintaining this in the upcoming years. Considering the 2012 prognosis it is an outstanding achievement that the EU is expecting a deficit of 2.5 percent, and its forecast remains below 3 percent for 2013.

The document presenting in detail the taxation policy of the Government and tax measures introduced so far is attached to this article.

(Ministry for National Economy)