This year, the European Commission will not be examining member states’ deviation from the system of budgetary regulations, it states amongst others in the working document of the 2020 country specific report and recommendations on Hungary published by the Commission within the framework of the European Semester.

In addition, thanks to the favourable employment trends to date, according to estimates the rate of unemployment in Hungary will be lower than in the European Union.

The main goal of the recommendations being put forward for adoption is to contribute to the handling of the social and economic effects of the coronavirus pandemic, and to assuring the rebooting of the economy and continued growth. In view of the epidemiological situation, in line with the activation of the so-called general exemption clause, this year the European Commission will not be examining any deviation from the system of budgetary regulations and will not be proscribing any numerical expected budgetary adjustment.

According to the Commission, the effects of the coronavirus pandemic will also be felt significantly within the fields of the job market and employment: The European Union’s average rate of unemployment of 6.7 percent for 2019 is expected to increase to 9 percent, after which a figure of around 8 percent may be expected again in the following years. The report stresses, however, that as a result of the positive development realised in Hungary in recent years, the expected level of the downturn is expected to be significantly lower in Hungary’s case. In addition, the Commission acknowledges Hungarian progress with relation to reducing unemployment, and praises the ongoing development projects aimed at digitalising education.

However, similarly to previous years, the Commission’s unfounded objection relating to the tax system, citing “aggressive tax planning”, also reappears.
The Commission objects to the fact that no withholding tax is payable with relation to the interest, royalty and dividend revenues of foreign businesses. This criticism is also unfair in view of the fact that in recent years the vast majority of foreign investment has come from within the EU, with relation to which it is precisely the community’s guidelines that demand that no withholding tax be levied.

Within the framework of international action against aggressive tax planning, Hungary has not only supported the adoption of European guidelines to combat tax evasion, but continues to regularly take an active stand against tax avoidance on all international forums.

The draft copy of the report is once again not without political overtones this year; however the Hungarian government is doing everything possible to ensure that the European Semester is exclusively a stage for constructive professional debates focussing on economic policy.

(Ministry of Finance / MTI)