Hungarian lawmakers approved tax measures proposed by Prime Minister Ferenc Gyurcsány's government late yesterday as part of a plan to cut the European Union's largest budget deficit to a third in two years. Of the country's 386 lawmakers elected in the April election, 196 voted in favor, 152 voted against and 38 were absent at the vote, according to parliament's Web site. The measures include a higher value-added tax rate, an increase in corporate and personal income taxes and a new capital gains tax. Hungary's budget deficit is the EU's largest compared with the size of its economy. Gyurcsány is under pressure from the EU, credit rating companies and the central bank to trim the shortfall, which is on track to miss the government's target for a fifth year. “This ensures that the measures proposed by the government for 2006 and 2007 will reach the goal we set,” Finance Minister János Veres said in a press conference yesterday. “Then we can freely decide when to adopt the euro.” The government plans to cut the budget deficit to about 3% of gross domestic product by 2008 from a revised target of 8% this year. The measures approved yesterday would slice FT 350 billion ($1.6 billion) from the deficit this year. Gyurcsány says, that these problems root from the fact that the government started reducing taxes, increased social spending and in the same time started enormous constructions. These three things summed up, he added, a smaller tax reduction would have meant more. Balance itself, the prime minister stated, does not have a political orientation. (Bloomberg, MTI)
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