Government submits 2019 budget bill to parliament

Finance Minister Mihály Varga submitted Hungary’s 2019 budget bill to parliament on Wednesday.

Before presenting the document to House Speaker László Kövér, the minister said the bill is designed to guarantee Hungary’s security, maintain economic growth, support families and pave the way for full employment.

Next year’s budget targets economic growth of 4.1 percent and a budget deficit of 1.8 percent of GDP based on European Union accounting rules. The public debt is seen dropping to 70.3 percent from 72.9 percent of GDP.

The Fiscal Council said earlier that the deficit target of 1.8 percent and public debt reduction laid out in the 2019 draft budget were achievable. It noted that the draft contains 60 billion forints (EUR 187.5m) in reserves in the Country Protection Fund and an additional 110 billion forints of reserves set aside for extraordinary government measures.

The targeted reserves for next year include 78.4 billion forints for pay rises in the public sector and 40 billion forints for the development of public services.

Varga said the budget retains the 15 percent personal income tax rate under a single-rate personal income tax regime.

The VAT rates of milk, eggs, pork, poultry, fish and other basic foodstuffs will remain at 5 percent, he added.

Tax cuts are also set to continue, he said. The government sees real wages rising significantly again this year, leaving room for a 2 percentage point reduction in the social contribution tax from 19.5 percent to 17.5 percent, Varga said. These 2 percentage points will mean that 100 billion forints will remain with entrepreneurs, he said.

The budget allocates 242 billion forints for the government’s family home purchase subsidy scheme CSOK. Tax benefits for families with two children will rise to 40,000 forints, the minister said.

The budget bill posted on the website of parliament shows total revenue of 19,580.097 billion forints and total expenditures of 20,578.531 billion forints. Revenue is 4 percent over that in the 2018 budget. Expenditures are 2 percent higher.

The deficit is targeted at 998.433 billion forints, 27 percent lower than the gap targeted for 2018.

The budget bill targets corporate tax revenue of 399.5 billion forints, 8 percent over the target for 2018. Revenue from the Simplified Business Tax (EVA) is set to fall by 35 percent to 45.4 billion forints, while revenue from the Itemised Tax for Small Businesses (KATA) climbs 20 percent to 135.7 billion forints.

The target for revenue from the bank levy is 52.9 billion forints, up 5 percent from the 2018 target. Revenue from the financial transactions duty is seen climbing 11 percent to 228.1 billion forints.

Revenue from VAT is targeted at 4,285.8 billion forints, 12 percent over the 2018 target. Revenue from excise tax is expected to edge up 3 percent to 1,136.3 billion forints.

The bill targets revenue from personal income tax of 2,361 billion forints, 13 percent more than the target in the 2018 budget. Revenue from household fees is seen edging up 2 percent to 192.4 billion forints.