Hungary has no room for big tax cuts but the payroll tax system should be changed, Prime Minister Ferenc Gyurcsany said on Tuesday.
Gyurcsany said that care must be taken to ensure the country’s overall tax revenues do not fall, but payroll taxes can be reduced.
“We must speak honestly to voters. If they believe it important to cut taxes and contributions on labour — which I believe is important — then we must also undertake the other part of the programme, which must obviously generate new revenues elsewhere,” said Gyurcsany.
Shock therapy cannot be used in the context of tax reform, he said. Instead a well-balanced policy should be pursued, said Gyurcsany.
“We must not practice shock therapy in any direction; not in social affairs, nor can we give up significant tax revenues and put the budget through shock therapy,” he said. This would be an irresponsible move, he added, saying, “we must not move from social populism to tax populism now”.
Gyurcsany said however that it was important to reduce state spending gradually but significantly in the next 3-4 years, he added.
Gyurcsany, Finance Minister Janos Veres and Economy Minister Gordon Bajnai held co-ordination talks with economists on Monday. After the meeting, Gyurcsany said substantial reductions in Hungary’s taxes and contributions were necessary.