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Hungary Defends Tax Strategy

by Ulrika Lomas,, Brussels

06 November 2012

Hungary’s Economy Minister has confirmed that consumption taxes will rise and income tax will decrease, as part of a strategy to keep the state budget deficit below 3% of GDP.

György Matolcsy’s announcement followed a warning by the International Monetary Fund’s representative in Hungary that new tax measures recently announced by the government were contrary to IMF and EU recommendations. The country is currently seeking EUR15bn (USD19.7bn) in financial assistance.

Concerns about new taxes have also been raised by the Erste Group Bank, which is Hungary’s second-biggest lender. ERSTE CEO Andreas Treichl has expressed concern at the frequency with which the Hungarian government is changing its tax policy, and that consequently Erste is unwilling to predict when it will return to profitability.

Mr Matolcsy was speaking at an event organized by the American Chamber of Commerce in Budapest, in which he stated that the country’s budget has been consolidated, and that unemployment and government debt have been reduced.

The EU expects Hungary’s deficit to reach 3.9% of output in 2013 as opposed to the government’s 2012 target of 2.7% of gross domestic product.

Prime Minister Viktor Orban’s policy has been to defend flat taxes and to avoid sharp spending cuts to reduce the deficit.

TAGS: tax | Hungary | fiscal policy | gross domestic product (GDP) | budget

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