Apr 15, 2016

The 2017 budget boasts tax reductions and housing benefits

The 2017 draft budget offers the chance to everyone to take a step forward, and there will be some who will have the opportunity to take a big leap forward, János Lázár, the minister heading the prime minister’s office said at the 46th Governmentinfo press conference.

Mr Lázár confirmed that they will submit to Parliament a budget of tax reductions and housing benefits at the beginning of May, and the House may approve the budget some time around 10 June.

Economic stability allows personal income tax to remain at 15 per cent on a standard basis, and additionally permits “a reduction of household expenses” in the case of the most important foodstuffs, he said, highlighting: the reduction of the VAT on milk, eggs and poultry to 5 per cent will help pensioners and the poorest. The VAT reduction in the case of these three product categories will amount to HUF 100 billion. The Minister said in justification of the reduction of VAT on these foodstuffs and the contemplated housing benefits which are worth another HUF 100 billion that the Government has succeeded in stabilising the economic situation of the State, and the revenues now exceed the expenditures. Hungary has repaid its enormous debt to the EU and the International Monetary Fund (IMF) which saved the country from sovereign default in 2008, he stressed. 

The Minister further reported that the VAT on restaurant services will decrease from 27 to 18 per cent which will result in a difference of HUF 20 billion, while the amount of the decrease resulting from the reduction of the VAT on Internet services will be a little below this sum.

He also highlighted that the salaries of teachers, police and military personnel and civil servants will further increase in 2017, and separate career models will be developed for members of the ambulance service and those working for the tax authority. A decision was further adopted that a separate fund worth HUF 100 billion will be set up for health care developments which may also serve the purposes of pay rises. The government has initiated a consultation with the sector with respect to the funds so allocated, and the government will respect the position representatives of the sector will adopt, he added. 

Mr Lázár took the view that it is important to continue the public works scheme and the job protection action plan, together with the reduction of bureaucracy, and indicated that next year’s budget will also feature the elements of the Modern Cities Programme. 

There will be scope for the reduction of the country’s sovereign debt by virtue of the fact that, for the first time since the change of regime, the balance of the budget will be zero, he said. He told the press that they will propose to Parliament that they should debate the operating and development chapters separately and should not allow a deficit in the former. In other words, loans should only be taken out for the purposes of developments. 

In order to achieve a reduction in the sovereign debt, the deficit on the development side can only amount to maximum 2.5 per cent. Therefore the Government is planning a 2.4 per cent deficit on this side and is simultaneously expecting a 3.1 per cent economic growth rate. Inflation is planned to be below 1 per cent – as he later told the press, between 0.7 and 0.9 per cent –, while the unemployment rate will have to be nearer to 6 per cent than 7. 

In answer to a question, Mr Lázár also pointed out: they are not planning to increase taxes, not even in the case of the excise duties. 

He further told the press that Eurostat, the statistical office of the EU described the Hungarian fiscal and financial control system as balanced upon the inspection of the data for 2014 and 2015. He added: in seven areas out of ten expenditure functions, for instance, in the field of education, Hungary spends in excess of the EU average. 

The minister said that our defence expenditures are below average, and therefore defence expenditures will increase significantly in 2017. Health care funds, too, fall below average, and the government is planning to make changes in this department as well, he indicated. 

Upon evaluating the data of Eurostat, he said: social expenditures account for 30 per cent of the entire budget, and this is one of the highest in the EU. In answer to a question, Mr Lázár also told the press that the government will not levy a special tax on the letting of housing properties as it does not support this concept.

Government awaits Curia’s decision on referendum initiated on quotas 

In Mr Lázár’s view, the European Commission "wants to force its will through in steamroller fashion,” and now Prime Minister Viktor Orbán is the person who tries to stop this by seeking political allies. He indicated: they are currently awaiting the Curia’s decision regarding the government’s referendum initiative. 

Mr Lázár informed the press that there are two sets of consultations ongoing with the parliamentary parties "in the interest of protecting Hungary.” The consultations regarding the counter-terrorism action plan are making good progress, he continued, and expert meetings are being conducted at present with respect to the amendment of 23 laws. He said that the government has accepted the opposition proposals relating to the amendment of the penal code, defense procurements and secret intelligence gathering, and there are quite a few other proposals which they are ready to consider. There are four-party consultations without MSZP regarding the amendment of the Fundamental Law and the defence legislation, he added, in order to determine how the defence forces can be deployed in a migration crisis. 

He further told the press that Hungary’s contribution to the EU aid granted to Turkey amounts to HUF 4.6 billion. 

Mr Lázár reiterated that the Hungarian government is suing the European Commission, and in addition to Hungary, this lawsuit was also joined by Poland. Hungary, Slovakia and Poland are fighting against the resettlement quotas together, he said. He added: in addition to the European Commission, Germany, Greece, Sweden, Luxembourg, Italy, France and Belgium are also parties to the lawsuit against Hungary. 

In response to Jobbik’s proposal regarding the amendment of the fundamental law, Mr Lázár repeated what he had said earlier: the issue in question is equal in its importance to the issue of the country’s accession to NATO or the EU, and the people must decide on this question. Once the people have decided, they may explore the possible amendment of the fundamental law, he said.

Third round of land auctions to begin 

The third, and last round of land auctions will begin in May, Mr Lázár said. The minister heading the prime minister’s office told the press: there will be auctions for a month, the terms and conditions will not change, and there will be no reductions in the prices or area sizes. 

He further reported that the State will obtain a revenue of HUF 240 billion from the auctions conducted to date. Some 10,000 farmers have bought land, but the names of only ten of them are in the public domain, he remarked. Mr Lázár added: the land sales have achieved their desired social goal, and have opened the possibility to all farmers. 

Those who sign the socialists’ referendum initiative risk their own data 

The minister was asked several questions regarding the parliamentary decision on the Sunday closure of shops. He reiterated: he believes it is an erroneous decision, and did not attend the vote at the prime minister’s request. His absence represents a vote against the decision. He said: he did not attend any meeting where a threat would have been levelled to the effect that any minister who votes against the proposal would lose his office. 

He stressed: his view coincides with that of László Kövér, Speaker of the House. Mr Lázár takes the view that Sunday should be a day of rest for everyone, and when they managed to obtain a parliamentary majority for this decision two years ago, it was a great victory. He added: he sees the revocation of this decision as one of the defeats of his political career. “I would rather be a principled conservative than a pragmatist without principles”, he said. 

He sharply criticised MSZP on account of the stance it took on the matter. He said: MSZP created the opportunity for people to have to work on Sunday. Those who sign the socialists’ referendum initiative risk their own data, he pointed out. 

Mr Lázár said in answer to a question regarding the one hundred per cent wage supplement that employers and employees will have to come to an agreement. The government may only interfere with this process if so requested by the parties, given that this is an issue of the private economy. 

In answer to another question, he also told the press that the referenda on the Sunday closure of shops and illegal migration would have been held on the same day. The minister is of the view that the referendum initiated by the government may be held at the end of the summer or in the autumn.

Asphalt case successfully closed 

Mr Lázár further reported that Prime Minister Viktor Orbán requested an action plan from every minister with a view to the acceleration of the state projects implemented from EU funds. He told the press that 710 priority state projects are behind schedule, concerning funds worth HUF 3,500 billion in total. 

He also said that they have succeeded in settling the asphalt case with the European Commission in negotiations. Hungary was faced with the threat of a potential adjustment of HUF 200 billion. Based on the agreement, this will amount to maximum HUF 40 to 50 billion, but in his words this will not represent a net loss as it can be credited from the allocation. 

Political Capital acted as fund-raiser of government before 2010

Mr Lázár was asked about news reports to the effect that the consulting firm Századvég did not recommend the construction of stadiums in a study. Mr Lázár replied: it is not Századvég that governs the country, but Viktor Orbán’s government. The cabinet takes the view that sports and physical exercise are extremely important, for the purposes of which the necessary conditions must be made available, he explained. 

The Minister was also queried about the studies of political capital which were made during the previous government for the former ffice for National Security. He said: there are vast differences in magnitude, given than HUF 27 billion was paid for them, and though it would be only fair and just if they were in the public domain, they cannot be located. In his view, political capital acted as a political fund-raiser and this is why the documents have been made to disappear.

The head of the prime minister’s office told the press that 56,675 war widows and war orphans have applied for war victim benefits since the passage of the relevant law last June, and some 1,500 of them do not live in the current territory of Hungary. 48,000 of them have already received the benefits they are eligible for.

Mr Lázár also said: due to the Slovak approach to dual citizenship, in Slovakia they will also make it possible for applicants to apply for these benefits with Hungarian nationality cards. 

Mr Lázár was queried about the fact that the US State Department criticised the situation in Hungary in its world report concerning the state of human rights. The Minister took the view that the report assessed the immigration situation, rather than the state of democracy in Hungary in general. He pointed out that, according to the report, the state of democracy has improved in Germany by virtue of the fact that they let migrants in without any controls, while the state of democracy has deteriorated in Hungary on account of the fact that it chose to protect itself. Hungary disagrees with this, he pointed out. 

The minister was further asked about whether the teachers who will strike will be subject to any sanctions. He said: it is none of the government’s business what the individuals concerned do beyond their working hours, but during the working hours the rules of going on strike are laid down by law, and if these rules are disregarded, they will have to face sanctions. He pointed out that services must be maintained in the interest of the children and their parents. 

He informed the press that he will submit the bill on civil servants this week, and he has received authorisation from the government to submit the bill on the landscapes of localities. Regarding the latter, he said that it is designed to determine the statutory boundaries for architectural customs specific to settlements. As he said, every Hungarian municipality will be required to adopt an ordinance regarding the landscape of their locality, and the observance of this ordinance will be compulsory for all architects even for filing construction plans for properties with a ground space of less than 300 square metres. 

Mr Lázár told the press that the Ministry of Human Capacities served a payment notice on the National Roma Minority Government on March 30th, which will allow 30 days to repay HUF 1.6 billion.