Further tax cuts hinge on growth, says Varga

Banking

Hungaryʼs government could consider further tax reductions if the countryʼs economy grows at a steady rate of more than 3%, National Economy Minister Mihaly Varga said in an interview published in today’s issue of business daily Vilaggazdasag, Hungarian news agency MTI reported.

“We’ve taken things as far as they can go, just as the prime minister requested,” Varga said when asked if the government planned further tax cuts on top of recently announced reductions to the corporate tax and payroll tax, according to MTI.

“I think everybody has reached the limit of their possibilities, both employers and employees. Now we should wait and see the impact on the economy. That’s why I think it’s too early to revisit the budget. We have to see how the first three months turn out. Only afterward will it make sense to deal with the question of amending the budget. If our expectations are validated and the economy can grow at a steady rate more than 3%, then we’ll have the resources for further measures,” the news agency quoted the minister as saying.

Asked what taxes might be cut if there is fiscal room for maneuver, Varga said he was “certain” that taxes on labor should be reduced, but added that it was also a question of whether to lower the personal income tax rate.

“In my opinion, as we’ve reduced the corporate tax to 9% and brought the payroll tax down to the Central European average, it would make sense to cut the personal income tax. I really hope that this question will be on the agenda in 2018,” he said. “A single-digit, flat-rate system is the goal,” he added.

Varga said the new payroll tax cuts aim to improve competitiveness and must be coupled with a reduction in bureaucracy as well as improvements to the education system.

“We’re working on this and want to establish a competitiveness council with the involvement of economic players, research institutes and experts that can make recommendations. I hope there will be concrete initiatives that the government can weigh by as soon as next year,” he added.

Varga also said he hoped the National Tax and Customs Office (NAV) would be able to prepare companies’ tax returns based on information they provide in future, just as the office prepares personal income tax returns.

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