Parliament approves tax hikes

Banking

Hungarian MPs approved the government's New Balance package of tax hikes aimed at keeping a lid on the budget deficit this year and cutting it in 2007, with 196 votes for and 153 against on Monday. The tax hikes include a raise of the mid-band VAT from 15% to 20% and the introduction of a 4% "solidarity tax" to be paid by businesses. The Ft 350 billion package for 2006 also includes spending cuts aimed at keeping the budget deficit from rising above 8% of the GDP. The vote also paves way for further budget cuts worth 1,000 billion to be effected next year. Finance Minister János Veres said on Monday that no additional measures would have to be taken for the 2007 budget, and he insisted the current legislation will ensure that Hungary is ready to decide on adopting the euro in the second half of 2010. Most economists have criticized Prime Minister Ferenc Gyurcsány's government for relying on revenue boosting measures instead of making cuts to spending on such items as Hungary's relatively generous welfare provisions.

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