VAT cut bad for revenues?

Reducing Hungary’s main VAT rate by two percentage points to 25 per cent would result in “many hundreds of billions of forints” of lost budget revenue, András Tállai, the deputy finance minister, said in an interview published in Friday’s issue of the daily Magyar Idők.

“It’s basically wrong to say that a reduction in the main VAT rate would be good for families. If Hungarian decision-makers reduced the top VAT rate from 27 to 25 percent, there would be an immediate fiscal shortfall of many hundreds of billions of forints; very little, if any, of this amount would find its way back into the pockets of families or consumers,” Tállai told the paper.

“Based on earlier experience in Hungary, most of that money would go to commercial businesses,” he added.