The prime minister’s new tax cut plans will not go very far in its aim of stimulating economic growth and will only benefit a small section of the populace, analysts told business dailies Napi Gazdasag and Vilaggazdasag on Friday. The tax package is skewered towards people higher up on the wage ladder while measures to combat the black and grey economy are unconvincing, analysts quoted by Napi Gazdasag said.
The benefits of the tax cuts worth 300 billion forints (EUR 1.05 bn) will be felt most by those earning 231,000 forints or above a month, as tax cuts only become more substantial above that income level, the paper said.
Businesses will reduce their payroll taxes by 7,000 forints per month per employee at most, as a result of the employer’s contributions to be lowered from 32 percent to 27 percent.
Tax evasion will not be fought easily, especially if measures such as levying an 11 percent health-care tax on tax-free in-kind contributions are included in the package, the paper said.
Another concern raised by analysts is a planned limit on cash transactions — in other words, compulsory bank transfers for private individuals paying for services, which is very likely to meet disapproval for its unconstitutionality, Szabolcs Vamosi-Nagy, a partner at Ernst and Young and former vice-chairman of tax office APEH told the paper.
It is doubtful whether the tax package would succeed in boosting economic growth and competitiveness, analysts quoted by business daily Vilaggazdasag said. The biggest flaw of the package is that it fails to cut state spending and boost employment levels, they said.
“It is not yet clear whether plans include further changes, even tax hikes, head of research institute Kopint-Tarki Eva Palocz told the paper. Tax cuts for businesses could boost foreign investment, but the measures overall are not ambitious enough to stimulate the economy all that much, Palocz said.
Eszter Gargyan of Citibank said the package lacks real measures on reforming the education system in a way that it suits labour market demands better.
Istvan Hamecz of OTP Alapkezelo said a shock therapy of incentives which would make work more financially viable than living off welfare benefits is missing from Gyurcsany’s tax plans. Hamecz said the welfare system was currently counter-productive and discouraged of work, which is Hungary’s biggest flaw in competitiveness in the region.