The government has adopted an economy protection action plan consisting of 13 plus 1 points, the principal elements of which relate to the simplification of taxation, the reduction of the rates of certain taxes, and the consolidation of taxes. The government would like to uphold the Hungarian economy’s dynamic growth, Finance Minister Mihály Varga said at the press conference Governmentinfo.
Among others, the rates of the social contribution tax and the tax of small businesses will decrease, there will be fewer taxes, it will be possible to do away with the simplified tax for businesses, and the cabinet will also initiate the abolition of the requirement of tax advance replenishment. The rate of the advertising tax could be reduced to 0 per cent by the end of 2022, and the VAT on accommodation services will decrease to 5 per cent, while VAT up to HUF 5 million will be refunded in the case of housing projects carried out in small settlements.
The Finance Minister stressed that the first quarterly GDP data suggests that the Hungarian economy could expand at a rate of around 4 per cent also in the future. Despite this, projections show that the growth of the European economy, including the Eurozone and Germany, will slow down. The government wishes to achieve that the Hungarian economy’s growth rate remains 2 per cent above the average EU growth rate, he highlighted.
In answer to a question, he said in next year’s budget – about which the cabinet will release further information next week – they are calculating with a lower deficit compared with this year’s deficit target.
The Finance Minister spoke about employment which has increased significantly in recent years. He stressed that the results achieved must be preserved, the creation of jobs was positively successful; according to the latest data of the Central Statistical Office, the unemployment rate has fallen to 3.5 per cent, and compared with 2010 there are 800,000 more people in employment in Hungary. It follows from this that it stands to reason to introduce further measures in the future which serve to reduce taxes and other contributions on work force, he observed.
As one of the first steps of the action plan comprised of 13 plus one points, the social contribution tax will decrease by 2 percentage points, from 19.5 per cent to 17.5 per cent as of 1 July 2019. This measure will leave an extra HUF 144 billion with economic players in 2019, and some HUF 156-160 billion in 2020, he said. The rate of the tax of small businesses (kiva) will decrease from 13 per cent to 12 per cent from 1 January 2020. Some 40,000 businesses avail themselves of this taxation arrangement, and the reduction will leave HUF 5 billion in the pockets of small businesses.
He indicated that they are also seeking to simplify taxation; as expected, the number of taxes will also decrease, and it will be possible to do away with the simplified tax of businesses. He pointed out that the government will also initiate the abolition of the requirement of tax advance replenishment; in the future, it will be possible to settle any outstanding tax liabilities together with the May tax returns.
Mr Varga highlighted that the cabinet will propose the reduction of the advertising tax to 0 per cent by the end of 2022, which will have a market expansion effect according to expectations. As they wish to achieve a further development in the tourism sector, the VAT on accommodation services will decrease from 18 per cent to 5 per cent, and parallel with this a 4 per cent tourism development contribution will be payable.
The Finance Minister said they wish to encourage housing projects in small settlements, and to this end they will refund the VAT on such construction projects up to HUF 5 million. In the future, private businesses, too, will receive grants for the construction of workers’ hostels, he added.
He indicated that up to the end of 2022 the cabinet wishes to continuously reduce the limit, on the basis of which businesses may be eligible for development tax benefits; this measure could concern six to seven thousand businesses.
With a view to supporting the expansion of the economy and assisting the development of a guarantee system that supports lending, both Garantiqa Hitelgarancia Zrt. and the Credit Guarantee Foundation for Agricultural Businesses will receive significant capital increases. Garantiqa will receive a capital injection worth HUF 10 billion, while the Credit Guarantee Foundation for Agricultural Businesses will be given HUF 5 billion for the purpose.
Mr Varga said the government is planning to implement a ten-year programme for the extension of the irrigation system in Hungary, as part of which they will spend HUF 17 billion annually on the development of the domestic irrigation system.
In the 2020 budget, the government has allocated HUF 32 billion more, HUF 157 billion, for supporting research and development.
Mr Varga indicated that from 3 July this year, new government bonds will be released to the market under the name ‘Hungarian government securities plus’. The bonds will carry a highly preferential interest rate, starting from 3.5 per cent, and after purchase, at the end of the fifth year the interest will rise to 6 per cent. In addition to the state treasury and banks, housing savings funds will also take part in the trading of these securities.
In answer to a question, he observed that the trading of government bonds aimed at early pension savings will also start in the autumn.
At the Monday session of Parliament, Prime Minister Viktor Orbán highlighted that, based on the data for the first quarter, the Hungarian economy grew most in the European Union in the first three months; “at present, Hungary is one of the three most dynamically developing economies in Europe”. Meanwhile, however, the EU’s performance is “less rosy”, the growth of the old Member States is slowing down, the Prime Minister pointed out. He added that this means that the achievements of the Hungarian economy must be protected, and every year we must exceed the European growth rate. He described expansion at the rate of 2 percentage points above the EU’s average as a realistic goal. The government will present the economy protection action plan to the House in the interest of the attainment of this goal.
The Economy Protection Action Plan can be viewed as an attached document on the right.
(MTI)
