17 June 2013

Hungary: Government measures to safeguard achievements

At the press conference, a 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.

Minister for National Economy Mihály Varga informed the audience that the Government is proposing to increase the financial transaction duty from the current 0.3 per cent to 0.6 per cent 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 per cent to 0.3 per cent, while the upper limit of HUF 6,000 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 2,500 to HUF 5,000. Mihály Varga emphasised that higher telecom taxes will only be payable by businesses and not by private persons. Mining fees are also about to increase from 12 per cent to 16 per cent. The Government also recommends the levying of healthcare contributions of 6 per cent on interest incomes, similarly to the levy on capital gains.

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 per cent at the time when the 2013 Budget Act was adopted, and that was revised down to 3.1 per cent in the Convergence Programme. The latest processes, however, signal that the pace of the deterioration of the forint’s purchasing power will be even slower this year. The rate of inflation has not been this low for 40 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 301 billion for this year, but the budget received only HUF 52 billion until the end of May: that means that instead of the pro rata temporis 42 per cent, only 18 per cent 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.

Full press release

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