Excise duties, gambling tax could rise to fill budget gap from slower growth, says PM

There will be "one or two tax rises" among the measures to fill a HUF 100 billion gap in this year's central budget resulting from slower-than-expected growth, Prime Minister Viktor Orbán said on Thursday.

The governing parliamentary Fidesz fraction will discuss further home-protection steps aimed at dividing burdens between banks and borrowers next week, Orbán said in an interview with the television channel TV2 on Thursday evening.

Orban said he regards a 3-4% state debt reduction to be feasible for the moment, and will make a related announcement next week.

Among possible tax measures, the prime minister mentioned the increase of the gambling tax and the excise duty on cigarettes and spirits as possibilities.

The government will raise taxes that are not connected to everyday necessities, and will halt every expenditure that could be postponed by one or two years, Orbán said.

The prime minister saw practically no chance to freeze budget spending items "as we have reached a critical limit of public expenditure under which we cannot go", noting that he could be more specific only after the two-day cabinet meeting next Wednesday.

The government will take measures, however, which do not endanger its most important goals--the creation of jobs, the kick start of public works and the protection of homes, Orbán said.

A planned act on stability, to be approved by a two-thirds majority, will protect the main pillars of the economy, stipulating that Hungary's pension, health and higher-education systems must be self-supporting. And "local governments must take into account state considerations and interests as well in the course of economic management to avoid a situation in which the central budget is stable, while local-council budgets fall apart, and sink to their necks in debt", the PM said.

The option of fixing for a period of three years the exchange rate for the loan service of troubled borrowers of foreign-currency-denominated loans is not a steady and final solution to the affected families, but at least "gives them breathing room", Orbán said.

The governing parliamentary fraction will discuss further steps to protect homes at its three-day meeting next week. The aim is to share the burden between the banks and the people, Orbán said.

The government will stick to the flat-rate personal income tax it introduced this year, the prime minister said, adding he would not support the introduction of a solidarity tax as this could induce people to take their income abroad.

Speaking of foreign policy, the prime minister said Hungary should seek and find new and strong allies in the east. Close alliances could be established in specific fields with the Arab countries, Israel, China, India and Russia as these countries experience declining debt and growing economies. Hungary has a chance to become such a country as well, the PM added.