Prime Minister says some tax cuts are possible, but not radical reforms

If there is any room for tax cuts next year, the government will probably consider scrapping the 4% surtax (különadó) on businesses and the flat Ft 1,950 health care contribution paid by employers, Ferenc Gyurcsány said to a conference organized by international companies operating in Hungary. The surtax was introduced two years ago as part of the government’s fiscal stringency package aimed at reducing the country’s soaring budget deficit. It practically raised the 16% corporate tax levied on companies to 20%.

Gyurcsány pledged that his minority Socialist government would not slacken fiscal policy but stick to the tight budget plan pledged in its euro convergence program.

However, he also said there was no chance of radically reforming Hungary’s welfare system, neither from a political nor a socio-political perspective.

Gyurcsány didn’t say how much the government plans to put towards tax cuts next year, but reiterated that the goal was still to reduce the tax burden.

Commenting on Hungary’s current political state, the Prime Minister said the economic measures that are needed now cannot be implemented for social reasons.

The Liberals want a radical overhaul of welfare spending to make room for more tax cuts, but the Socialists believe there is no public support for such measures, forcing the government to adopt more gradual changes, he said.

Gyurcsány vowed to continue reforms in health care. For instance, the government is now looking into increasing competition by allowing private health care companies to buy services from the state health insurance system, he said.