Varga announces Economy Protection Action Plan


Minister of Finance Mihály Varga has announced a number of tax cuts and growth incentives as part of a plan to shield the economy from the impact of a global slowdown, according to official government website

Mihály Varga (photo: Gergely Botár/

At a press conference, the minister stressed that Q1 2019 GDP data suggests that the Hungarian economy could expand at a rate of around 4% in the future.

On the other hand, projections show that the growth of the European economy, including the eurozone and Germany, will slow down. The government wants the Hungarian economy’s growth rate to remain at 2% above the average EU growth rate, he highlighted.

Varga said the social contribution tax would be reduced from 19.5% to 17.5% from July 1. The measure, which he said would leave HUF 144 billion with businesses this year and HUF 156 bln next year, is in line with an agreement reached by the government with employers and unions that links social contribution tax cuts to private sector wage growth from 2019.

He said the advertising tax would be reduced to 0% until the end of 2022. The government wants to reduce the Small Business Tax (KIVA) rate from 13% to 12% from January 1, 2020. The measure would leave HUF 5 bln with the some 40,000 businesses that opt to pay the tax, he said. The KIVA rate is well over the 9% corporate tax rate, but KIVA companies enjoy a number of exemptions.

The Minister of Finance said that tax administration would be reduced. The Simplified Business Tax (EVA) will be phased out, while other taxes will be consolidated, he added. He said rules requiring some companies to pre-pay their taxes in installments would be eliminated.

VAT cuts, more funds for R&D

The government also plans to encourage housing projects in small settlements, and to this end they will refund the VAT on such construction projects up to HUF 5 million. In the future, private businesses will be able to receive grants for the construction of workers’ hostels, he added.

Varga also announced plans to reduce the VAT on commercial accommodation from 18% to 5%, while at the same time introducing a 4% tourism contribution in the sector.

In the 2020 budget, the government has allocated some HUF 32 bln more (HUF 157 bln), for supporting research and development.

Varga confirmed that from July 3 this year, new government bonds will be released onto the market under the name "Hungarian government securities plus," with an interest rate starting from 3.5% but rising to 6% by the end of the fifth year. In addition to the state treasury and banks, housing savings funds will also trade in these securities.

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