The compensation process for local governments which have incurred losses in the Buda-Cash affair has begun and compensation payments are due at the beginning of next week, Minister for National Economy Mihály Varga told HírTV.

As the Minister stressed, a few of the altogether sixty-seven local governments involved have already received the amount. He added that the most important issue is to pay wages for people as soon as possible. The amount of total losses is estimated to be more than HUF 3bn, but it can all be settled only later on, he said.

Responding to a question on the “ideal personal income tax rate” of 0 percent recently hinted at by Prime Minister Viktor Orbán, Mihály Varga said that although the performance of the Hungarian economy may result in such ambitious goals, it is unlikely that it would be realized in the next couple of years. He pointed out that personal income tax revenues total some HUF 1500bn per year, and the budget cannot do without this amount. He said, however, that a single-digit personal income tax rate may replace the current rate of 16 percent by the end of the current parliamentary term –  “9 percent could be a target” – adding that even so the budget would lose HUF 480-500bn from revenues.

The Minister also mentioned that the economy has become more transparent due to the introduction of on-line cash-machines and more than 180 thousand retailers use the new cash machines. This measure generated extra revenues of HUF 250bn in 2014, and the government is expecting to receive some HUF 60bn more thanks to the introduction of the Electronic Road Transportation Control System (EKAER) this year. As far as the advertisement tax is concerned, the Minister said it is being under consideration.

Speaking about GDP data published recently by the Hungarian Central Statistical Office, he underlined that these data show that government efforts aiming to turn the country into a European and regional production hub have been clearly right. As the latest statistics indicate, besides the vehicle sector, growth has been underpinned by the entire manufacturing industry, and the electronics, pharmaceuticals and food sectors. He emphasised that production capacities with synergies are worth improving and jobs must be created at these productive sectors.

Mihály Varga stated that the government expects further economic expansion in 2015 and JP Morgan recommends the purchase of Hungarian government securities. Credit rating agencies must acknowledge the performance of the economy over the past one year, he said, because “if decisions are made purely on the basis of facts and figures, Hungary certainly deserves an upgrade.”

(Ministry for National Economy)