Finance minister Varga spoke about the pleasant part of fiscal plans the other day

HUNGARY - In Brief 01 Jun 2019 by Istvan Racz
The government is just about to deliver to parliament the draft budget plan, together with the adjoining tax package, for 2020. Probably on this occasion, finance minister Varga appeared publicly on May 30, announcing 13 measures, including tax cuts and refunds, steps to simplify the tax administration and increases in various subsidies. The most important measures are: the reduction of the social contribution tax, the main source of revenue for social security, by 2% points to 17.5% of gross wages from July 1 this year, the cut of the VAT on hotel services to 5% from the current 18% in January 2020, the elimination of the so-called advertising tax, and additional subsidies to support research and development, the irrigation of agricultural land, credit guarantees to SMEs and agriculture, housing in rural areas, and the construction of workers' hotels (to increase domestic labor mobility. In addition, Mr. Varga also noted that the sale of the ÁKK's new 5-year fixed-coupon retail bond will be started from June 3 already.According to our own first estimate, based in a great part on information from official sources, the fiscal impact of the foregoing measures will total HUF144bn (0.3% of GDP) for 2019 and HUF330bn (0.7% of GDP) for 2020. However, the single biggest item on the list, the cut of the social contribution tax, does not represent a new measure: it is part of the approved budget for this year. The rest of the list refers to measures affecting 2020 and onwards. So the total fiscal impact of the newly announced measures is zero for this year and HUF174bn (0.4% of GDP) for 2020.In conclusion, the newly announced fiscal package is small, even though it obviously in...

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