Hungary Sees Deeper Recession, Plans Tax Overhaul
Hungary’s government is proposing to overhaul taxes worth as much as 900 billion forint ($3.8 billion) to revive the economy after forecasting a contraction of as much as 3.5 percent this year, which will also cut budget revenue.
The government wants to cut payroll taxes and allow more people to pay the lower of two income tax rates, while increasing value-added taxes and excise taxes to limit the impact on the budget, Prime Minister Ferenc Gyurcsany told lawmakers in Budapest today. The deficit may be as much as 2.9 percent of gross domestic product, rather than an earlier 2.6 percent goal.
Eastern Europe’s economies are buckling under the weight of the global financial crisis, which has slowed demand in key export markets. Hungary, which needed international aid to avert a default last year, must maintain a tight budget policy to avoid instability even as the economy plunged into its second recession in two years at the end of last year.