Economy & Policy

New Hungarian measures to restart the economy

Restarting the economy can only be effective if the government simplifies both the tax system and the bureaucracy.

Minister of Finance Mihály Varga stated that JP Morgan’s estimated decline of 6 percent for the Hungarian economy will not affect the Ministry of Finance. It still sees a decline of 3 percent, followed by a possible increase of over 4 percent in 2021.

Administrative simplifications are one way the ministry hopes to boost growth, and one of its greatest achievements on this front is that four types of employee taxes have been merged into one.

Varga also emphasized that the government had consulted with several organizations before deciding to possibly limit the amount small tax-payers can bill each client without incurring taxes to HUF 3 million. László Parragh, President of the Hungarian Chamber of Commerce and Industry, said that currently 12.5 percent of the total workforce, nearly 150,000 people, are working as entrepreneurs under the KATA, small-tax-paying vehicle, and abuse of the system has become an issue (as some companies have been forcing employees to become self-employed to use the system for tax benefits). The new regulation may take effect on January 1, 2021.

Zoltán Guller, CEO of the Hungarian Tourism Agency, reported that there were already 190,000 guests staying at hotels in Hungary last weekend, 20,000 of whom were foreigners, equating to 30 percent of the country’s accommodation capacity being utilized. Air traffic is also slowly recovering, although the traffic at Budapest Airport is still much lower compared to the same period last year. 

In total, the government is providing some HUF 600 billion to protect tourism. Fortunately, the sector is already recovering on its own.

Varga further announced a proposal to simplify rules for paying the tourism development contribution and for expanding the scope of the employer-provided Széchenyi holiday cards for the use of accommodations.

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