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Hungary: Tax cut is not a magic tool

The government plans a tax cut from 2009, but the necessary reserves are only available for the first year, Prime Minister Ferenc Gyurcsány said in a lecture held at Budapest’s Corvinus University.

As further source of the tax cut coverage Gyurcsány suggested the bleaching of black and grey economy from 2010, because no more finances can be removed from the social subsidies system.

The government would cut taxes by Ft 1,000 billion in four years, which includes the decline of personal income tax as well as employers’ contributions, he said. But tax cuts are no magic tools, an increase of larger scare requires the change of education and social structures plus the business environment, Gyurcsány said. State expenditures can only be reduced in the medium run until 2012 by 3-5%.

The government will submit next year’s budget to Parliament in two weeks and the budget will calculate with a 3.2% budget deficit. It will be the first time since 1989 that the budget has a declining deficit even getting close to an election period, Gyurcsány highlighted. (Gazdasági Rádió)