Budapest (MTI) – Economy Minister Mihaly Varga submitted the 2016 budget bill to House Speaker Laszlo Kover in parliament on Wednesday.

Before submitting the bill, Varga confirmed earlier-announced measures that would save households 170 billion forints (EUR 557m) next year, including 120 billion forints as the result of a reduction in the personal income tax rate from 16 percent to 15 percent, 25 billion forints in savings from a reduction in the VAT rate on unprocessed pork, 15 billion forints from increased family tax preferences and 10 billion forints from lower state administration fees.

The budget bill assumes gross domestic product (GDP) would grow by 2.5 percent next year and inflation would be at 1.6 percent. It targets a budget deficit of around 2 percent of GDP.

Kover said Parliament could approve the budget on June 22 or 23. The general debate will start on May 27, he added.

The 2016 budget bill targets revenue of 15,790 billion forints, expenditures of 16,551 billion forints and a deficit of 761.6 billion forints. It projects nominal GDP of 35,188 billion forints.

The bill targets VAT revenue of 3,351.9 billion forints, up from 3,172.4 billion in the 2015 budget.

Revenue from personal income tax is targeted at 1,658.4 billion forints, up from 1,639.7 billion forints in 2015.

The bill targets revenue from the bank levy of 89.2 billion forints, down from 144.2 billion in 2015, confirming the government’s earlier announced plan to cut the tax by about 60 billion forints in anticipation it would boost lending activity.

The advertising tax is set to bring in 10.9 billion forints, compared with 6.6 billion forints in 2015. The government has proposed changing the rate of the tax to 5.3 percent on a tax base over 100 million forints.

The bill targets revenue from the telco tax of 56.0 billion forints, down from 56.4 billion for this year. The target for revenue from the utilities tax was lowered to 52.2 billion forints from 54 billion forints.

Government commissioner for the national consultation on digital development Tamas Deutsch suggested on Tuesday that the government could lower the two taxes for internet service providers.

Revenue from the financial transactions duty is targeted at 200.9 billion forints, down from 206.2 billion forints in the 2015 budget.

State debt is projected to fall to 73.3 percent of GDP by the end of 2016 compared with 74.3 percent at the end of this year.

The budget bill targets state debt of 25,898.5 billion forints at the end of 2016, assuming a HUF/EUR exchange rate of 303.7, a HUF/CHF rate of 289.4 and a HUF/USD rate of 276.3.

The defence budget will be just below 300 billion forints, up 50 billion forints from 2015. The ministry of defence will contribute 4 billion forints to NATO’s budget and 2.29 billion forints to NATO’s Security Investment Programme.

The interior ministry, which includes law enforcement, will have its budget raised from 483.7 billion forints this year to 504.7 billion in 2016.

The budget of local governments will rise by 12.5 billion forints to 661.74 billion forints next year.

Spending on European Union developments was set at 1,400 billion forints or 4 percent of GDP in 2016. The draft projected that 12,000 billion forints of EU funding would come to Hungary in the 2014-2020 budgetary framework, 60 percent of which would be spent on economic developments and job creation.

The health-care budget will earmark 10 billion forints more for support to GPs practices. The target for the Health Insurance Fund is 1,963.7 billion forints next year, up from 1,912 billion forints in 2015.

The education budget will rise, the state agency for schools (Klik) will receive 549.5 billion forints from state coffers and 12 billion forints from its own sources. This includes targeted expenditures for payroll costs of 404.48 billion forints, up from 386.86 billion forints in 2015.

The budget of the Ministry of Foreign Affairs and Trade will have its budget cut by 11.07 billion forints from 2015, to 92.139 billion forints in state support and 8.23 billion forints in its own revenue.

The budget of the Prime Minister’s Office was set at 183 billion forints for 2016, down from 210 billion this year.

Support for political parties will stay level next year at 3.8 billion forints, 75 percent of which is distributed in proportion to votes cast for the party in the last general election, provided the votes exceeded 1 percent of all votes cast. The rest is distributed equally among all parties who received a mandate in the election.

The government debt management strategy will continue to focus on reducing state debt as a proportion of GDP, cutting the share of FX debt and boosting household participation in financing the debt, according to the bill. In the framework of the strategy, most of the financing for maturing debt will be covered by forint issues.

Photo: MTI

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