Hungary’s two small parliamentary parties, the liberal Free Democrats and the conservative Democratic Forum, may appear to many as an irrelevance given their paltry poll ratings, but their MPs’ votes will be crucial to the minority Socialist government when it comes to next year’s budget.
Janos Koka, the parliamentary group leader of the Free Democrats, told MTI in an interview on Tuesday that he sees eye-to-eye with Ibolya David, leader of the Democratic Forum, on a number of key issues, such as introducing a flat tax and supporting any measures aimed at boosting Hungary’s small and struggling middle class.
Both parties are keen to put pressure on the government – whose various factions are in the process of thrashing out ideas on revamping the tax system – to embrace tax initiatives aimed at helping Hungary’s small and medium enterprises.
The Socialists appear to be preparing to phase out a four percent corporate tax – which largely affects multinationals – over the next two years and hike value-added tax in various brackets, including foodstuffs. In addition the governing party wants to introduce limited tax cuts of up to around 400 billion forints, according to press reports.
As long as it can square the circle of sticking to budget cuts set down in the country’s convergence programme while sustaining generous benefits for pensioners and the poor, it will use any surplus room for manoeuvre for limited tax cuts.
But this is not enough as far as David and Koka are concerned. Koka said that the tax burden on companies should ideally be reduced by 1,000 billion forints over 3 years, and this proposal is something that business chambers and international tax advisors agree on.
Both David and Koka are committed to a flat tax. Koka believes that it should be set at 20 percent while David says that it should be anywhere between the radical proposal of 16 percent put forward by the main conservative opposition Fidesz and the Free Democrats’ suggestion.
Koka said time was needed to see how successful countries would address common problems which Hungary also currently grappling with, and a consensus should be sought for a programme for the next three years. Funding health care, welfare spending and liberalising the pensions systems, aging society, the credit crisis were issues to which the answer should be restricting the role of the state and the amount it spends and reducing the company and employment-related burdens, he said.
He insisted the current government would be doing the opposite, raising taxes and adding red tape if it were to dilute reforms to the pensions system and the transformation of the tax and health systems. “Then we will be going in the opposite direction to the rest of Europe and Hungary has already gone against the tide many times in the past decade,” said Koka.
He called on the opposition parties to work together with the government, however, insisting that it was better that a responsible consensus should emerge. He said it was unlikely that Fidesz would get a majority in parliament for its alternative tax plan and it should join in building a consensus on how to cut spending and taxes over the next three years. (1 EUR = 231.30 HUF)