Economy
Hungary PM Orbán reveals plans for January 2019
January 2019
The PM was asked what we should expect in terms of taxation if his Fidesz party wins another four-year term on government. He replied:Today’s Hungarian tax system operates well. [...] The Hungarian tax regime stimulates performance and it does not neglect aspects of fairness, either. Consequently, the proportionate tax system will remain, as it is only fair that if you earn ten times more, you pay ten times more in taxes. The proportionate tax system helps people plan their future in a predictably.
As regards plans relating to competitiveness he said he agrees with those that urge to improve the country’s competitiveness."As for myself, I sympathise with the observations of the economists making up the team of analysts at the National Bank of Hungary. They represent a rather radical standpoint that has already been presented by Governor György Matolcsy," Orbán said. He added:
We need to take bold decisions in this area, and after summarising the visions of different workshops we need to launch a strong competitiveness policy in January 2019.
Orbán said the Hungarian model rests on four pillars:- competitiveness,
- full employment,
- demography policy,
- identity policy
If a decision is made in any of these areas, it must take into consideration the other three, he underlined.
Orbán has talked about similar plans at a recent event organised by the Hungarian Chamber of Commerce and Industry (MKIK).
We know this document from somewhere...
This is not the first time Orbán hints at competitiveness-related central bank publications. Last February, he said central bank’s 2016 book on competitiveness should be treated as a silver thread in respect of economic policy measures of the future. He urged everyone to study this document carefully.We have reported extensively about the central bank’s Competitiveness and Growth book, pointing out that it could serve as a menu for the government and could have been given the title Széll Kálmán Plan v3. We have also talked with MNB executives in charge of working out proposals for the improvement of competitiveness.
Then it turned out in October 2017 that the central bank will publish competitiveness reports regularly.
The Competitiveness Report examines and evaluates Hungary’s competitiveness position along the principles and proposals laid down in the book. The publication also includes a detailed examination of areas and factors - such as productivity, quantity and quality of human resources, technological readiness, regulatory environment, entrepreneurial attitude or quality of financing possibilities - which usually are given less attention in the central bank’s traditional macroeconomic analyses, although they are determinants in terms of economic developments. MNB economists use more than 100 indicators to assess competitiveness, saying more than 90% of them are objective ones.
In this regard, MNB chief economist Dániel Palotai noted in his presentation that in the much-quoted Global Competitiveness Index by the World Economic Forum (WEF) only 26% of the indicators are objective.
MNB economists have also created a spectacular chart that shows the relative competitiveness position of Hungary from the aspect of every key competitiveness indicator, identifying the areas where improvement can be achieved.
We should also keep in mind that the National Economy Ministry has also put its mind to this matter, supporting the work of the competitiveness council headed by Economy Minister Mihály Varga. After one of these meetings the minister usually announces concrete plans.
As a bonus, here’s the potential menu
In its 2016 book, the central bank lists the following measures as a proposal for the cabinet. In view of what Orbán said in the interview, we would not be surprise to see these again but now as actual steps after the election (provided Fidesz wins again, which is likely).- Cut taxes on labour.
- Incentivising the least-employed groups to work.
- Raising the upper limit of the Job Protection Action Plan.
- Upgrading the public work scheme.
- Strengthening the incentive elements of the pension system for staying on the labour market.
- Encouraging atypical forms of employment.
- Reducing tax avoidance.
- Simplification of corporate income tax payment.
- Moving corporate income taxation closer to cash flow-based taxation.
- Regular evaluation of existing tax benefits.
- Increasing R&D funding.
- Increasing the number of researchers and developers.
- Boosting the innovation management capacity of the SME sector.
- Competing guarantee organisation to help boost lending to SMEs.
- More active domestic industrial policy, adaptation of new technologies.
- Economic development both regionally and locally.
- Examining ways to further lower regulated energy prices.
- Revision of staff and wage-related expenditures at public institutions.
- Revision of the structure of public administration.
- Incentivising compliance culture.
- Accelerating public administration via e-governance.
- Accelerating the issuance of building permits.
- Developing public utility services.
- Raising the cap on the child care fee (gyed)
- Raising the tax base benefit for families with two children.
- Raising the maternity lump-sum grant.
- Increasing the capacity of pre-primary and nursery schools.
- Additional resources for the health care system by letting in private funding.
- Increasing the number of regular screening tests, encouraging sports at the work place and in schools and further raising the so-called public health product fee.
- Financial reward in the pension system for having children.
- Supporting the development of voluntary pension and health care funds, and the protection of those signing up for old-age insurance schemes.
- Channelling private funds into education.
- Competency- and skill-based teaching materials.
- Improving language skills in secondary education.
- Further raising the ratio of those with tertiary education certificates/diplomas.
- Raising the ratio of graduates in engineering or in scientific disciples.
- Increasing R&D spending in higher education.
- Mental health package.
Front page photo by MTI Fotó/ Szilárd Koszticsák
