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.
The bill puts revenue from the toll on commercial vehicles at 197.8 billion forints, up 11 percent from the 2018 target.
The Prime Minister’s Office and its related institutions will altogether get 790 billion forints. The budget chapter on the office targets over 51.6 billion forints in revenues.
The allocation in the chapter for a capital raise in the project company for the upgrade of the Paks nuclear power plant is 106.1 billion forints and 135 billion forints is earmarked for developments in Hungary’s biggest cities under the Modern Cities programme.
The bill shows a 3.6 billion forint allocation for the preparation and implementation of the Liget Budapest Project, an overhaul of the capital’s City Park.
The bill allocates 287.2 billion forints for the Ministry of Foreign Affairs and Trade, targeting 6.98 billion forints in own revenue. A total of 73.96 billion forints will go towards funding Hungary’s representative offices. The budget targets 6.36 billion forints in operating revenue in this area. As regards the management of the ministry, the bill shows operating revenue of 187.8 million forints and spending of 11.4 billion forints.
In health-care spending, funding for general practitioners’ surgeries will rise by 1 billion forint to 130 billion forints. The government will spend 2,442 billion forints on the health insurance fund compared with 2,319 billion forints in 2018.
Spending on local governments will rise by over 32 billion forints from this year’s 705.4 billion forints to 737.3 billion forints.
The interior ministry will have 35 billion forints less to spend on the handling of mass migration. At the same time, it will get 23.5 billion forints more for counter-terrorism measures.
The police forces will get 234 billion forints compared with this year’s 218 billion forints. The TEK counter-terrorism force will get 13 billion forints for personnel expenses, the same amount as this year. It will be given 2.3 billion forints for material expenditures next year, down from this year’s 2.6 billion forints.
The defence budget will increase by 86 billion forints to 513 billion forints, or more than 1.16 percent of GDP. In 2012, the government adopted a resolution in which it pledged to increase defence spending by 0.1 percent of GDP from 2016.
Pension funding for women who choose to retire early will be 258.6 billion forints. Spending on old-age pensions will rise from this year’s 2,669 billion forints to 2,773 billion forints next year. Orphan support will decrease slightly from 32.5 billion forints to 30.5 billion and funding for widow’s pensions will be 357 billion forints compared with 348 billion forints in 2018.
The final vote on the bill is expected on July 20.
Featured image: MTI