Weekly newsletter

What Is Known of the Government’s Budget Adjustment Package So Far

Hungary Today 2022.06.08.

Events have gathered pace recently around the government’s fiscal adjustment program. On Saturday, the special tax regulations and the general amounts of spending cuts were released, fresh statements from the government were made, and the 2023 budget bill was presented to parliament, as Portfolio reports.

  • The government decree on special taxes and additional taxes has been published.
  • The government has published the decision on the spending cuts it will make in 2022 and 2023.
  • Economic Development Minister Márton Nagy, who drew up the package of measures, said over the weekend that the additional amount from special taxes would reach 1,000 billion forints (EUR 55,2 billion) next year, after an expected surplus of more than 800 billion forints (EUR 2 billion) this year.
  • Finance Minister Mihály Varga submitted a bill on the 2023 budget to parliament on Tuesday. The latter gives a rough estimate of how big a hole the special tax increases and other tax hikes could plug.
Trade Association Says Extra Profit Tax Cannot Be Interpreted in Current Form
Trade Association Says Extra Profit Tax Cannot Be Interpreted in Current Form

The sector's largest trade association regrets that the extra profit tax wasn't prepared in consultation with its member companies.Continue reading

It is important to note that the budget proposal does not tell us everything, because the 330-page document does not show what the government is currently budgeting on the expenditure and revenue side for 2022, nor does it say exactly how much each measure will improve the balance.

Portfolio expects the government to further increase the tax squeeze on targeted sectors next year, and our estimate is in line with Márton Nagy’s statement that the amount from “extra profit taxes” could reach HUF 1,000 billion in 2023.

In addition to the special tax increases, there are four other tax increases: excise duty, public health product tax, company car tax, and simplified employment tax. According to government communications, the combined annual impact of these is HUF 90-100 billion (EUR 230,000-255 million), but a similar breakdown and estimate cannot be made for these taxes as the government has not specified how much additional revenue it expects to raise in 2022 as a result of the increases.

Finance Min: Next Year's Draft Budget Includes 3.5% Deficit Target
Finance Min: Next Year's Draft Budget Includes 3.5% Deficit Target

Varga said in a comment posted on social media that the government's aim was to create a crisis-proof economy.Continue reading

According to the decision, the central budget expenditure could decrease by HUF 581 billion (EUR 1,500 million) this year and by another HUF 500 billion (EUR 1,270 million) next year. However, these are not presented in the 2023 budget bill.

In addition, in 2022 and 2023, the government will postpone investments worth HUF 1,150 billion (EUR 2,933 million), but exactly which items will be affected by these cuts is also not clear from the 2023 bill.

Overall, the adjustment package announced by the government is expected to consist of the following major items in 2022 and 2023, according to Portfolio:

  • HUF 2023 billion in additional revenue from tax increases.
  • Ministry spending cuts of HUF 1,081 billion (EUR 2,756 million). The question here is how far the implementation of the plans will be mowed down and how much will involve restructuring.
  • Investment deferrals of 1,150 billion forints (EUR 2,931 million).

This implies a total budget adjustment of 4,254 billion forints (EUR 10,840 million), which is higher than the 7% of GDP expected for this year (the total over two years).

In its 2023 budget bill, the government justifies the fiscal move by saying it needs to find funding to back the newly created Reconstruction and Defense Funds.

Featured image: illustration via Károly Árvai/MTI

    [1536x1536] => Array
            [width] => 1536
            [height] => 1536
            [crop] => 

    [2048x2048] => Array
            [width] => 2048
            [height] => 2048
            [crop] =>