Minister for National Economy Mihály Varga called next year’s budget the budget of tax cuts and housing programmes. He revealed that after the reduction of VAT on pork, VAT on milk, eggs and poultry is also set to be cut next year to 5 percent, but the VAT of Internet and restaurant services is also planned to be reduced. The budget is drafted with zero operational deficit for the central sub sector of the state budget.

“Next year’s budget ensures that everybody can make one step forward, and it will better safeguard Hungarian citizens,” the Minister stressed.

The draft bill was forwarded to the Fiscal Council on Wednesday, which has 10 days to comment on the document. Lower revenues resulting from tax cuts and higher expenditures stemming from the funding of housing programmes will be compensated by faster economic growth and extra tax revenues thanks to improving economic transparency: after this year’s expected GDP growth of 2.5 percent, the economy is predicted to expand by 3.1 percent next year, the Minister said. This year, along with a general government budget deficit of 2.4 percent, the state debt-to-GDP ratio is also seen lower.

Parallel to reducing the VAT on some basic food, the Government is about to cut VAT on restaurant services from the current 27 percent to 18 percent, and to 5 percent in 2018, he stated.

Responding to a question on bank tax, the Minister stressed that the Government adhered to the conditions set out by the MoU concluded with the EBRD and made a proposal on the further reduction of the bank tax next year, but negotiations with the European Commission have not been finalized yet.

Among anti-tax aversion measures Mihály Varga mentioned the extension of the use of on-line cash registers, for example to private medical services. Through the development of EKÁER, the system will be capable of measuring cargo weight, and an electric billing system will also be launched.

Several fiscal measures in next year’s budget aim to increase real wages, the Minister pointed out: the Government opens the window of opportunity for wage hikes. Although wage talks with various sectors have not been concluded yet, the necessary amount of funding will be earmarked in the budget.

The other major priority area alongside tax reductions is housing and the support of families wishing to have children, he said. According to the Ministry’s projections, a high number of new construction projects are set to begin in 2017 and therefore the amount of related subsidies will be raised by HUF 100bn.

Next year’s budget is being drafted in a new form. It is divided into three major areas: the first includes revenues and expenditures related to the operation of the state, and this is projected to have a zero percent deficit. One of the two other fields includes domestic and EU funding earmarked for development projects, which is planned to post some deficit.

The Minister also mentioned that the wording of the Convergence Programme is under way at the Ministry, and the document is scheduled to be submitted to Brussels until 30 April.

(Ministry for National Economy)