Gov't unveils Széll Kálmán Plan 2.0

Measures contained in the Széll Kálmán Plan 2.0 will improve the fiscal balance by a further HUF 150 billion in 2012 and by HUF 600 billion in 2013, the government said on its website.


The government noted that 83.4% of the HUF 550 billion fiscal improvement outlined for 2012 in the first Széll Kálmán Plan had been achieved, and government decisions taken thus far had supported the achievement of 73% of the targeted improvement for 2013.


The measures add up to about 2% of GDP in 2012 and to 4% of GDP in 2013, the government said.


The government confirmed it would halve the bank levy and withdraw sectoral "crisis taxes" in 2013. 


"With the Széll Kálmán Plan 2.0, the government will finalize the switch to such a tax system that creates the resources for a reduction in taxes on labour with an increase in tax on consumption on and turnover," it said. "This is a small burden for the individual, but a significant item in light of the whole budget," it added.


The government said the new tax measures are of a structural nature and would establish stability on the revenue side of the budget in the long term.


The plan outlines the introduction of five new taxes: a 0.1% tax on financial transactions that is seen raising HUF 130 billion-228 billion from its introduction in 2013; a HUF 2-per minute tax on telephone calls and tax messages set to raise HUF 30 billion in 2012 and HUF 52 billion from 2013; tax measures affecting energy suppliers to 16% that will generate HUF 55 billion in extra revenue calculating with the withdrawal of the crisis tax on the sector; taxes on insurance products that are expected to bring in HUF 15 billion of revenue; and the introduction of reverse taxation -- the practice of obliging the buyer, not the seller, of goods to pay VAT -- for grain, oilseed and protein crops in the farm sector that should generate HUF 10 billion in 2012 and HUF 15 billion in 2013.

On the expenditure side, the plan targets HUF 10 billion in savings on drug subsidies this year. Almost HUF 45 billion in additional savings are seen as well, mainly from spending freezes. 


For 2013, the plan targets HUF 40 billion in savings from another review of the drug subsidy system; public sector savings of almost HUF 45 billion already made in 2012 are set to be built into the base for 2013; rationalization at state-owned companies will save HUF 20 billion; the replacement of state subsidies with European Union resources at the Research and Technology Innovation Fund will save HUF 25 billion; and savings of HUF 10 billion will come from a HUF 10 billion reduction in central budget subsidies for public transport in big cities.


The Széll Kálmán Plan 2.0 contains Hungary's updated Convergence Program, which the government said it submitted to the European Commission on Monday. The updated Convergence Program shows the government is standing by its general government deficit targets in the previous program: 2.5% of GDP in 2012, 2.2% in 2013, 1.9% in 2014 and 1.5% in 2015.


The government sharply reduced its projections for GDP growth in the updated program to 0.1% for 2012 from 3.0% in the previous one. It lowered the projection for growth for 2013 to 1.6% from 3.2, the one for 2014 to 2.5% from 3.3% and the one for 2015 to 2.5% from 3.5%.


The government also raised its projections for state debt at end-2012 to 78.4% of GDP in the updated Convergence Program from 72.1% in the previous one. The projection for 2013 was raised to 77.0% from 69.7% and the one for 2014 to 73.7% from 66.7%.