The government’s 300 billion forint/year (about 1.2 billion euros) tax cut package would keep the government in equilibrium, maintain social security and build economic dynamics, but anything more than that would do the opposite, Hungary’s prime minister said in parliament on Tuesday.
Prime Minister Ferenc Gyurcsány was speaking after a meeting with the President of the National Union of Industrialists Peter Futo. Futo had approved of the overall tax cut package but said he would like to see the 1.2 trillion forint (about 4.7 billion euros) cuts introduced in less than four years.
“If the tax cut programme is accelerated the country would not be able to keep its deficit at bay and would have to reduce welfare and social security measures, so steeper cuts in taxes would not be a responsible move, the prime minister said. With the current programme, each worker will get an extra 60,000 forints (about 250 euros) in take-home pay next year in tax cuts, while employers will save 80,000 forints (about 335 euros) per worker, he added.
Exactly. What they need to do is reduce tax dramatically (so not by 2% like E&Y suggested.) The other thing they need to do is make sure that people actually pay it. This will whiten the economy and will probably result in more income than having very high taxes that no one actually pays.
Agree with Nina. The country has and continues to overspend. MSzP had so many opportunities to reign in spending in the last 6 years AND DIDN’T! Instead, it only further squeezes those that do pay and moans about those that try to avoid such. The tax cuts offered now are a start but they fail to deal with the real issues which continues to strangle the tax payers. The tax wedge is 150%+ on top of the cost of a person. So every 100 HUF that one takes home is matched by another 150 to 180 from the Employer. The employer is only looking at a reduction of 8K. This takes us to 140%+ which is still way to high. And, the extra 5K per month that one takes home will now be gobbled up by property taxes that Town Councils, who used to get money from Central gov’t now have to levy locally. While Central gov’t reduce some cost, that cost nonetheless remained.
3 years ago, Orban brought up the dire situation of the state’s finances but Gy dismissed such as “scare-mongering” and it never made it onto the national agenda. Given the dire nature of the finances, stiffling tax wedge and lousy international business credit situation, the citizenry should be consulted as to what painful solution they’d prefer to endure – and that can only happen by presenting options to the populace and giving a political party a mandate to take the tough decisions.
The basic problem is that there are more people in Hungary living off of taxes (raised here and in the parts of the EU that are giving us cash) and gov’t borrowings than on money created by productive work. Until the minority that is actually creating wealth threatens to just quit, nothing will happen.
It easy to blame MSZP, but they paid the price for cutting welfare in the 1998 years General Election.
Fidesz (1998-2002) started to throw money to the public after their poll numbers plumeted midterm. They were one of the few non-Socialist Govt that introduced a minimum-wage.
MSZP promised more than Fidesz in the 2002 General Elections and won. Fidesz complaints about the Govt have been based on less cutting welfare and more promising people will have it better if they chose Fidesz in the next Election (meaning more “free” money).
Hard cuts in a society is very hard if there is no main political consensus about it. As long as Fidesz and MSZP just want to overbid each other in the Elections with “free” money, nothing will change. We have the current minority Govt due to the Fidesz-sponsored referendum to abolish fees in the health-care, so no one will win political points (except maybe SZDSZ and MDF) on cutting the welfare.
Blame MSZP, but also ask Fidesz how they want to solve the problem – more “free” money?
@V. I’m not inferring one party vs. the other; I’m focused on the lack of a mandate from the populace to do anything. The election was not fought on improving the taxation; and before it can be tackled, hard choices have to be made that have the endorsement of the country. That’s why I’m saying there has to be a mandate.
@Erik. Ayn Rand wrote just such a precept in ‘Atlas Shrugged’; the do-ers just disappeared leaving the parasites to their own devices.
People tend to keep compensating and rarely pluck up the courage to say “enough” (just look at Zimbabwe!); instead, the economy continues to “peter along”, next to nothing improves and the general mood sours.