Economy
Hungary Fidesz economist urges new deal with IMF
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“I suggest the new government forges a new deal with the international lenders," Matolcsy told a conference today. He said the new agreement should be the launch of reforms in state administration, the system of taxes and contributions, education and anti-corruption measures.
Under the issue of tax reform Fidesz is examining three possible scenarios:
- the introduction of family taxation (i.e. personal income tax reform, with a single-rate PIT);
- broad-based reduction of taxes (including contributions, affecting every major tax);
- an overhaul of the contribution regime (a cut to labour-related taxes that could be the basis for a boost in the rate of employment).Matolcsy stressed that Fidesz would choose which of these to implement in view of the current state of the Hungarian economy, as well as the gravity of the crisis.
Chiming together with Fidesz President Viktor Orbán, Matolcsy also estimates that the 2010 budget deficit target will be overshot by about HUF 1,300-1,400 bn that will result in a gap of around 7.3% of GDP, against the government’s official forecast for a 3.8% shortfall.
The massive deficit is to be caused by smaller-than-expected revenues and excessive spending. The revenue shortfalls would stem from corporate taxes (HUF 50-70 bn), VAT (HUF 50-80 bn), property taxes (HUF 40 bn). On the spending side Matolcsy identified the main deficit boosting items as losses of the central bank (HUF 80 bn in 2010), the consolidation of National Development Bank MFB (HUF 140 bn), the putting off of expenditure items from 2009 to next year (HUF 100 bn), consolidation of Budapest Transport Company (BKV) and state-run railway company MÁV (HUF 300 bn), hospitals (HUF 110 bn), local governments (HUF 110 bn) and more.
Under the issue of tax reform Fidesz is examining three possible scenarios:
- the introduction of family taxation (i.e. personal income tax reform, with a single-rate PIT);
- broad-based reduction of taxes (including contributions, affecting every major tax);
- an overhaul of the contribution regime (a cut to labour-related taxes that could be the basis for a boost in the rate of employment).Matolcsy stressed that Fidesz would choose which of these to implement in view of the current state of the Hungarian economy, as well as the gravity of the crisis.
Chiming together with Fidesz President Viktor Orbán, Matolcsy also estimates that the 2010 budget deficit target will be overshot by about HUF 1,300-1,400 bn that will result in a gap of around 7.3% of GDP, against the government’s official forecast for a 3.8% shortfall.
The massive deficit is to be caused by smaller-than-expected revenues and excessive spending. The revenue shortfalls would stem from corporate taxes (HUF 50-70 bn), VAT (HUF 50-80 bn), property taxes (HUF 40 bn). On the spending side Matolcsy identified the main deficit boosting items as losses of the central bank (HUF 80 bn in 2010), the consolidation of National Development Bank MFB (HUF 140 bn), the putting off of expenditure items from 2009 to next year (HUF 100 bn), consolidation of Budapest Transport Company (BKV) and state-run railway company MÁV (HUF 300 bn), hospitals (HUF 110 bn), local governments (HUF 110 bn) and more.
