The Ministry for National Economy (NGM) is going to consider every proposal of a VAT cut; however, currently the impact of former reductions is being analysed, Minister for National Economy Mihály Varga told economic daily Világgazdaság. The Minister also noted that wage hikes were not causing structural problems and interest rates were still favourable for investment growth.

As long as Hungary’s rate of economic growth exceeded that of the EU, and particularly that of Germany, the country’s economic convergence was ongoing. Growth, on the other hand, hinges on several factors, he stressed. The weight of the automotive sector, which has been a major factor behind growth, must be maintained. The country must bring in investment which can partly help to keep existing production capacities but also to pave the way for new car industry technologies, such as the production of e-cars or self-driving cars, he said. The development of supplier chains is also important, so that later on these may bring their products to global markets on their own. The boosting of production chains of high added value is an economic policy objective but it also requires adequate labour force, he pointed out.

The six-year tax cut and wage hike agreement of 2016 has resulted in more predictability: payroll tax reductions have left HUF 400bn at enterprises.  The more than 10 percent increase in wages has not negatively influenced the number of jobs or work efficiency, he said.

As a response to a question on potential changes to the highest VAT rate in Europe, the Minister said that all options were being evaluated but now it was only possible to have other, targeted tax cuts. In the first half of this year, the impact of former measures is going to be assessed, he concluded.

(Ministry for National Economy)