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Hungary State Audit Office pats and slaps 2007 budget bill

Hungary's State Audit Office said on Friday risks to reach the government's VAT, personal income tax and registration tax revenue targets in 2007 have diminished.

The SAO, however, finds the achievability of apparently underplanned VAT proceeds (Ft 1,971 billion) doubtful due to an expected 4.2% year-on-year decline of real wages. The office formulated harsh criticism of the 2007 budget plan on certain points, but noted that buffer reserves to compensate for a possible overshoot were sizeable enough. The State Audit Office said in a review of the 2007 budget bill that it failed to address in detail the impacts of the already implemented measures and those that are yet to be introduced. The SAO said there were risks attached to the fulfillment of certain tax revenues and - on the spending side - the two funds of the National Health Insurance Fund, but noted the government's Ft 221 billion buffer reserve (four types of budgetary reserves) could be enough to compensate these. The office also noted that compared to the financing plan of the Government Debt Management Agency (ÁKK) elaborated on 12 October the 2007 budget bill contains Ft 334.2 billion larger reserves, i.e. the balance of central state budget and social security fund deficits and the surplus of extra-budgetary funds. Therefore, substantial reserves are at hand in next year's budget on the financing side. The SAO also noted, however, that the attainability of the 2007 financing plan carried risks due to increasing debt service costs, a potential change to investors' saving structure and a possible decline in foreign investors' willingness to buy the local and foreign currencies. (