Industry leaders pressed for an 8- to 10-percentage-point comprehensive tax reduction and an accelerated entry into the ERM-2 at a plenary session of the National Interest Coordination Council on Friday.
Ferenc Rolek, the spokesman for the employers side at the talks, which also involve unions and government representatives, said workers do not feel the weight of the crisis, but Hungary’s financing could become a big problem if taxes are not cut 8-10 percentage points in the interest of improving competitiveness.
The government has proposed cutting the payroll tax by five percentage points to 27pc.
Construction magnate Sandor Demjan, who heads the National Association of Employers and Entrepreneurs (VOSZ), proposed the government lower the corporate tax rates for industries hardest hit by the crisis. The corporate tax rate could be lowered from an effective 20pc, including the 4pc “solidarity tax”, to 5pc for industrial, farm and transportation companies and banks.
Prime Minister Ferenc Gyurcsany said budget spending cuts, a reduction in taxes on labour and a restructuring of the social welfare system could be discussed at the next meetings of the council. They will discuss spending cuts at the next meeting held in two weeks, he said.
The government can only cut payroll taxes in the interest of improving competitiveness if the balance remains in equilibrium. It can cut expenditures only to the extent that it does not endanger social security or threaten the peace, Mr Gyurcsany said. The restructuring of the social welfare system has to provide an incentive for work, he added.
“Experts and employers want bigger cuts in expenditures, while the cuts appear too be a lot from the point of view of employees,” Mr Gyurcsany said. Because of the disparity in views, everybody has to give up a little, he added. He noted the importance of acting rapidly. There are no countries that have escaped the crisis; even strong economies are counting on a 3-5pc recession, he said.
In spite of the disagreement over the size of the payroll tax cut, employers and unions more or less agreed with Mr Gyurcsany that no steps should be taken that worsen the crisis, short-term cuts in employment must be avoided, the crisis should not be managed with credit, and tax cuts must be matched with budget cuts.
Employees protested a government plan to end a tax exemption for extra-wage compensation such as hot meal or vacation vouchers.