Hungary’s liberals on Saturday asked the Socialist government not to raise value-added tax but instead to reform the tax system and cut back the state.
Janos Koka, the parliamentary leader of the Free Democrats, told reporters at the party’s convention that hiking VAT would boost inflation and make household items dearer at a time when people are suffering under the financial and economic crisis.
The government indicated earlier that it was considering cutting spending and raising taxes to make up for a hole of around 200 billion forints (EUR 725m) budget revenues this year.
Prime Minister Ferenc Gyurcsany said the government’s initial forecast of a contraction in gross domestic product of one percent had been too optimistic, and now the official forecast is for the economy to shrink by around 3 percent.
National daily Nepszabadsag said today that one option the minority governing Socialists were looking at was to hike VAT by 4-5 percentage points.
Whereas inflation has eased, the central bank’s room for manoeuvre in cutting interest rates is somewhat constrained by the need to keep the forint stable.
Hungary has two VAT bands set at 20 percent and five percent. Some items are tax free.
The Socialist will have to get the support of members of parliament of the opposite benches, and it usually relies on its former governing ally, the liberals, to back its legislation.
Koka said that any measure which carried an upward risk to inflation would also jeopardise Hungary’s timely chances of adopting the euro.
He added that Hungary needed stability, growth and the euro. For this further reforms are needed and the state sector should be rolled back.
Raise VAT up to 50% ,who cares ?? If these idiots still do not realise the harm they are causing,it is beyond me ! People cannot get credit,thus cannot buy expensive goods,thus no VAT raised.
As usual the poorer who pay cash for everyday things will suffer, but since when was that a concern to our ‘socialist’s’ .
The rest of Europe is lowering taxes, desperate to encourage consumer spending and cheaper lending. Must lend, must get liquidity, must stimulate our desperate economies – BUT Hungary. What the hell are you all thinking of?
This will be the biggest economic wipe-out since the War. And that’s in modern transparent ‘stable’ economies. How can a VAT (the most effective tax for killing demand) even be considered? For all your intelligence and Nobel prizes, clearly everyone at the top over there have been eating too much spicy Gulyas! Wake up, and salvage something before this storm hits.
ericius
Good comment,except –the storm as already hit,people will feel it very soon ! It is already too late my friend.2009 will be a terrible year for all of us,not just Hungary.