Hungary: Economic society urges tax reform, state spending cuts to spur growth

Banking

The Hungarian Economic Society (MKT) has urged the government to reform the country’s tax system and reduce state spending in order to spur growth.  

MKT noted that economists agree that Hungary’s growth potential had been consistently overestimated. It put the country’s growth potential at 3.0-3.5% rather than at 4% as earlier thought. To allow the country to achieve its growth potential, MKT said government should carry out sustainable tax reforms that reduce the country’s income centralization. If the tax reform is to work, however, the government must also cut expenditures Ft 1,200-1,500 billion.

The most effective reforms would include a reduction of the tax on labor, lessening the tax burden for SMEs and using exemptions from payroll tax and social contributions as employment incentives, MKT said. The fall in revenue could be made up for by cutting government expenditures, raising VAT and, probably, introducing a one-off property tax. MKT said growth should not be influenced unnecessarily by exchange rate policy. (MTI-Econews)

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