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Lawmakers approve 2018 budget in Hungary

Lawmakers approve 2018 budget in Hungary

BUDAPEST: The bill was approved with 127 votes in favour and 62 votes against. The 2018 budget targets revenue of 18,751.5 billion forints (EUR 61.2bn), expenditures of 20,112.1 billion forints, leaving a deficit of 1,360.7 billion forints. The deficit is over the 1.166.4 billion forint gap targeted for 2017.

The 2018 deficit target as a percentage of GDP is 2.4 percent, calculated with European Union accounting rules. Operating revenue and expenditures will balance out, while investments will create the deficit. The budget targets 4.3 percent GDP growth, up from 4.1 percent projected for 2017. It assumes an inflation rate of 3 percent. The small business tax will be reduced by one percentage point to 13 percent. Tax benefits for families with two children will rise, leaving them with an additional 420,000 forints a year in disposable income on average. VAT rates on catering, fish and internet service will be reduced to 5 percent, he said.

The former two have so far had a VAT rate of 27 percent, and the latter one a 18 percent rate. The budget allocates 81 billion forints more for education, 287 billion forints more for pensions and social services, 83 billion forints more for the police and security and 205 billion forints more for economic development. It earmarks 226 billion forints for home purchase subsidies for families. The budget targets a drop in public debt to 28,358.7 billion forints on the last day of 2018, calculating with a HUF/EUR exchange rate of 309.3. As a percentage of GDP, public debt is set to decline to 69.5 percent from a targeted 71.4 percent at the end of 2017. The bill puts net interest expenditures at an accrual-based 960.2 billion forints next year. The bill’s authors note that, according to the EU accounting rules, the government sector will still run a primary surplus equivalent to about 0.2 percent of GDP next year. The primary balance excludes interest expenditures. The 2018 budget bill targets corporate tax revenue of 362.6 billion forints, down 51 percent from the target in the 2017 budget. Revenue from the bank levy is set to fall by 24 percent to 50.4 billion forints next year. Revenue from the financial transactions duty is set to stagnate at 204.7 billion forints. The budget bill targets VAT revenue of 3,090.7 billion forints, up by 25 percent from the 2017 target.

Revenue from excise tax is targeted at 1,099.3 billion forints, 6 percent over the respective target for this year. Personal income tax revenue is targeted at 2,090.2 billion forints, almost 17 percent over the target for this year. Revenue from retail duties and fees is seen climbing by 22 percent to 188.6 billion forints, according to the bill. Revenue from kilometre-based commercial road tolls is 15 percent higher, at 177.7 billion forints, in the 2018 budget bill. The 2018 budget bill shows payroll costs of Hungary’s state school manager are targeted at 419.6 billion forints, 5 percent over the target for this year. Payroll costs at universities and colleges will rise by 14 percent to 222.3 billion forints and payroll costs for the human resource ministry’s social and child services is set to climb 18 percent to 81.6 billion forints. Wages in the private sector are also expected to climb next year, lifted by an agreement reached late last year on raising the minimum wage.

The agreement raised the minimum wage for unskilled workers by 15 percent and the wage for skilled workers by 25 percent from this year. The increase was paired with a 5-percentage-point drop in the payroll tax. Next year, the minimum wage is set to rise by 8 percent for unskilled workers and 12 percent for skilled ones, while the payroll tax will fall by a further two percentage points.