National Economy Minister György Matolcsy on Friday announced a package of measures that will result in a HUF 397 billion gross improvement to Hungary's 2013 budget balance. At the same time, he said the government lowered its projection for economic growth next year and raised the deficit target to 2.7% of GDP.
The measures - detailed in a report on Hungary's Excessive Deficit Procedure (EDF) submitted to Brussels and published on the government's website early Friday - include the application of a 0.3% financial transactions duty on cash withdrawals that is expected to generate an additional HUF 30 billion in budget revenue. The government is also raising the targeted amount generated from the financial transactions duty on the State Treasury by HUF 30 billion to HUF 40 billion.
The financial transactions duty will not be levied on the National Bank of Hungary, Matolcsy said.
The government expects HUF 95 billion more in revenue from VAT next year as the National Tax and Customs Authority (NAV) establishes online connections with retailers.
The extension of reverse VAT to the pork sector is expected to bring in HUF 10 billion in additional revenue, while new regulations on small business taxation generates HUF 15 billion more.
The government will scrap the ceiling on social insurance contributions, generating an additional HUF 51 billion in revenue, Matolcsy said. It will postpone an increase in teachers' wages from September of next year to January 2014, resulting in savings of HUF 73 billion, he added.
The government will establish an upper limit on social subsidies paid by local councils from 2013. It will also cut state co-financing for European Union-funded developments from 15% to 5pc next year, he added. The move will result in savings of HUF 55 billion.
Matolcsy said that 22,000 public sector jobs would be cut from 2013 with the restructuring of the local council system and the takeover by the state of local schools and hospitals. He added that in some parts of the public sector positions left empty by retiring employees would not be filled for the next three years.
Matolcsy said the government is raising the general government deficit targets for both 2012 and 2013 to 2.7% of GDP from 2.5% and 2.2%, respectively.
The government is lowering its projection for GDP growth next year to 1% from 1.6%, he added.
The EDF report shows the government calculates that the lower growth outlook and the exemption of the central bank from the financial transactions duty will have a negative impact equivalent to 1.2% of GDP on the budget balance next year. The government's Job Protection Plan, announced in summer, will take 0.9% of GDP from the balance, while reaching an agreement on precautionary financing from the International Monetary Fund and the European Union is set to improve the balance by 0.%c of GDP.
The government knocked down its GDP projection for 2012 in the report from near stagnation to -1.2%.
The EDF report shows the government targets a 2.2% of GDP deficit for 2014, up from the 1.9% ratio targeted earlier.