Hungary Postpones Deeper Fiscal Reform

by Ulrika Lomas, Tax-News.com, Brussels

22 April 2005

Hungary's newly appointed Finance Minister Janos Veres has stated that the country is not yet ready to undertake radical fiscal reform, and must first concentrate on cracking down on tax evasion.

Veres, who was appointed on Monday in place of former minister Tibor Draskovics, broadcast on the public television station MTV that a policy dubbed '100 steps' by Prime Minister Ferenc Gyurcsany meant smaller, more incremental changes in fiscal policy rather than bolder reform.

"I don't see that there are elaborated plans in Hungary for deep changes in any of the big redistribution systems, any of the big systems of the public sector," he stated.

However, analysts have speculated that the surprise appointment of Veres, who has strong ties with the socialist movement, will herald the coming of an election-orientated budget.

This is an accusation denied by Gyurcsany who told radio listeners on Tuesday: "I can confirm there will not be an election year budget."

Veres went on to add that revenues will be bolstered this year by a government crackdown on a new form of business tax evasion involving VAT, noting that the abuses have been "widely spread". He also announced plans to crack down on the black economy.

However, Veres did not rule out the possibility of more tax cuts, especially in the company sector, with plans progressing towards a phase out of the unpopular local business levy next year.

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