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Govt, MPs agree on HUF 300 bln reduction in workforce burden

The parliamentary group of governing Fidesz-KDNP has agreed with the National Economy Ministry on a HUF 300 billion reduction of the burden on labor, group leader Antal Rogán said on Thursday. The resulting gap will be funded from extending the planned new financial transaction duty to the the National Bank of Hungary and to the Treasury and partly from budget reserves, National Economy Minister György Matolcsy said.

 The package must not affect the main numbers of the 2013 budget nor the 2.2%-of-GDP general government deficit target, Matolcsy said.

The proposed changes could lift Hungary's GDP growth to as much as 2% from the planned 1.6% next year, and, if approved by the government, could affect favorable 1.5 million employees and enterpreneurs, the minister said.

The package on which the government and MPs agreed involves the introduction of a single-item tax for small taxpayers and a similar measure for companies that employ fewer than 25 people, Rogán said.

Burdens will be reduced for workers under 25 and over 55 as well as for unskilled, physical labourers, he said. The biggest preferences will be given to those with low wages, he added.
The single-item tax – similar to the "simplified business tax" in place at present – will replace all earlier forms of taxes for small taxpayers, such as cobblers, hairdressers and journalists, Rogán said.
The HUF 300 billion reduction will not affect the budget deficit, he stressed.

KDNP parliamentary group leader Péter Harrach said the package also included, at the initiative of his party, a proposal to reduce taxes for the unemployed and mothers with small children.
Matolcsy said after the meeting with Rogán and Harrach that HUF 100 billion for the HUF 300 billion burden reduction programme would come from extending the financial transaction duty to the National Bank of Hungary and another HUF 100 billion come from extending it to the Treasury. Another HUF 100 billion is to be "borrowed" from a combined HUF 320 billion of budget reserves at present, he added.

Borrowing the above HUF 100 billion will not affect the level of budget reserves as the government would pay it back in the course of 2013 from savings on lower yields, the minister said. The start of talks with the IMF and the EU on financial assistance will realistically reduce yields already this year, and Matolcsy said he expected savings of at least HUF 150 billion from the [HUF 1,325.5 billion] allocation on interest expenses in the 2013 budget bill.

In addition to HUF 100 billion budgeted for extraordinary or unforeseen government measures in both this year's budget act and next year's budget bill, the budget bill contains HUF 200 billion in unallocated reserves, down from HUF 170 billion this year. The 2012 budget also includes HUF 98 billion in interest risk reserves.

Matolcsy said he and the two parliamentary group leaders agreed to extend the financial transactions duty to the National Bank of Hungary the Treasury.
Parliament's website showed that a respective amendment to the bill on financial transaction duty was submitted on Thursday morning.

The Fidesz-KDNP alliance also proposes to make the payment of pensions, family and maternity allowances exempt from the financial transaction duty. Mr Rogan added that they see no point in putting the duty on intercompany transactions of significant exporters.

Other details of the programme will be published on Monday, Rogán said, adding that they asked the government to submit the related amendments to Parliament by July 12. Parliament will end its ongoing extraordinary session on July 13.