Hungary govt publishes Big Reform Book


Hungary's government has published on its website a 300-page document analysing the achievements during its tenure since May, 2010, and restructuring plans "to turn the country into the most competitive economic environment in Europe" once the crisis is over.

The "Big Reform Book", subtitled the "Hungarian road of growth and employment leading to sustainable development", is dated to February 2012, and was published on the government website by the National Economy Ministry in Hungarian on Thursday.

Long-term stability can be guaranteed only by parallel growth of employment and economic growth, and the "Hungarian Growth Plan" supposes active economic policy measures in this direction, the document states, adding that the aim is for Hungary to become a "regional economic hub".

It singles out high indebtedness and high unemployment as the two biggest obstacles to sustainable development, and lists measures already taken regarding the Constitution which limits government indebtedness, a local government "anti-deficit" financing reform, limitations on bureaucracy and red-tape, a labour code reform compliant with new requirements of both the economy and employers, reduction of benefits for the unemployed and the sick, employment of the jobless within the framework of social economy, helping higher education to cater for the needs of the real economy, the introduction of the new, flat rate income tax system which it terms proportional and economically stimulating, the early fx mortgage debt repayment scheme at fixed rates, another programme based on an agreement with the Hungarian Banking Association to further reduce fx mortgage debt of households, among others.

Part of the programme is the "New Szechenyi Plan", launched in January, 2011, which targets the inception of one million new tax-paying jobs within ten years by kick-starting the economy by way of seven strategic directions which are the health industry, the green economic development, a new housing programme, development of the business environment, innovation, employment and the development of transport for the use of the opportunities of a transit economy.

Among important measures taken so far the document highlights the pension reform, the sectoral crises taxes and spending cuts which altogether resulted in an ESA95 general government surplus of an estimated 3.8% of GDP -- or an estimated deficit of 2.8% of GDP without on-off measures -- last year, and will result in a deficit of no more than 2.5% this year if budgetary reserves will not be drawn on.

Measures the be taken this year within the framework of the "Szell Kalman Plan", adopted in March, 2011, to improve the general government balance, are worth HUF 550 billion of which HUF 458 billion are already decided upon or are under decision-making, the document stated.

The document notes that Hungary's new constitution adopted a target of reducing state debt to 50% of GDP (from above 80%), and regulations on setting fiscal targets by the Stability Act adopted last December.

It vows support for the tax reform the government started after taking power in the spring of 2010, including the flat-rate personal income tax system. It does not specifically mentions, however, the flat-rate corporate tax system, an earlier stated goal.

The document also highlights tools which can enhance export with the involvement of small and medium enterprises, and also help Hungarian companies invest in the Carpathian basin.

Total taxing will little change this year while the weight of personal income taxes and payroll taxes decreases and the weight of VAT and taxes on harmful activities increases, and tax allowances will be further limited.

The document says that Hungary's plans to contribution to the Europe 2020 strategy through

    - raising the employment rate of the 20-64 age group to 75% by 2020;

    - raising the ratio of R+D spending to GDP to 1.8%;

    - increasing the renewable energy resources in total energy use to 14.6%, reaching energy savings of 10% and limit greenhouse gas emission outside EU emission trade to at most 10% of the 2015 level;

    - raising the ratio of those with higher education within the 30-34 age group to 30.3% and reduce the ratio of those with no more than basic education to 10% in the 18-24-year old population;

    - cutting the ratio of those living under the poverty line by 5 percentage points or 450,000 by the year 2020.

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