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Parents raising children should be refunded personal income tax paid this year

At the business conference organised under the title ‘Hungary Restarted’, the Prime Minister highlighted that the crisis brought on by the coronavirus epidemic took its toll on families raising children; there are many families that were compelled to dig into their savings.

Therefore, if we manage to achieve a 5.5 per cent GDP growth in Hungary, the Prime Minister will propose to the government that at the beginning of 2022 parents raising children should be refunded the personal income tax that they paid into the budget in 2021.

“I suggest that rather than distributing this sum, rather than putting it here or there, we should simply give it back to those who worked for it, who earned it, and then paid it into the budget,” he said.

He stressed that the richest do not need this, and therefore a line should be drawn at the average income. The personal income tax paid below this threshold should be given back to parents raising children so that they can replenish their savings. According to the Prime Minister’s calculations, this amounts to some HUF 550 to 580 billion.

He also emphasised that there must be a minimum wage of around two hundred thousand forints “on the horizon”. He warned, however, that if the HUF 200,000 minimum wage is “hailed” upon Hungarian small and medium-sized businesses in a single step, they will go bankrupt, people will be laid off, and instead of full employment, we may expect unemployment.

Therefore, if we want a higher minimum wage – HUF 200,000 in one step or two – small and medium-sized enterprises must be given help with this in the form of a perceivable reduction in their taxes.

He suggested to President of the Hungarian Chamber of Commerce and Industry László Parragh that “thinking ahead, for a year or two, or even three years” they should conclude a comprehensive agreement about the sum of the minimum wage, and should not allow the horizon to fall below HUF 200,000.

He also stated that the process of the reintroduction of the 13th monthly pension, too, must be seen through, and next year pensioners will also have to be paid the second weekly instalment of the 13th monthly pension.

In his address, Mr Orbán listed three axioms in connection with the restarting of the economy. In his view, the first one is that they are faced with a challenge that is not governmental or political in its nature, but an economic and social challenge extending to the whole of society, and accordingly, the response given cannot be purely political in its nature.

This means that we need wide-ranging cooperation with all actors of the economy, he added.

The second axiom, in his view, is that an economic policy cannot be pursued on a party-political basis.

This is not a party issue, when the economy must be restarted, we need everyone, he said.

The third axiom, according to the Prime Minister, is that in such a situation as the present one, there is no scope for an election budget.

If “we opt for an election budget,” there will be no restarting, and therefore, a restarting budget must be compiled; it is in this spirit that “we submitted the 2022 budget,” he said.

He announced that the phase of the protection of the economy was coming to an end, and the phase of the restarting of the economy was about to start. Two new operational groups will be set up, one under the leadership of Minister of Foreign Affairs and Trade Péter Szijjártó which will be responsible for the restarting of life in the economy, while the other under the supervision of Minister without Portfolio for Families Katalin Novák which will be responsible for restarting social life.

Regarding the deficit of the budget, he said, in 2020 it was 8.1 per cent, this year’s could be 7.5 per cent, while next year we would like to go down to 5.9 per cent. The Prime Minister believes that reducing the budget deficit to 3 per cent next year is not feasible as, in his view, this would be such a shock for the real economy that “we could hardly bear”.

He highlighted that, according to Governor of the central bank György Matolcsy, we must avoid a “post-COVID syndrome” in the economy as well. An important means to achieve this is full employment which counters the uncertainty that remains in the wake of the epidemic, while the credit debt repayment moratorium is another, he added.

He took the view that we “can’t jump out” of the credit debt repayment moratorium as we can only phase it out according to a sensible schedule. This is why it has been extended until September in order to have time to agree on the necessary changes. It is understandable that those dealing with finances and banks want to return to the earlier debt repayment regime as soon as possible, but we need a cautious script, and this has yet to be negotiated, Mr Orbán said.

He stressed it is also an important question how we should return to a balanced budget, and how we could achieve a budget with a surplus.

He further said we must offer something to small and medium-sized enterprises (SMEs) in order to counter the fact that the Growth Credit Programme of the National Bank of Hungary will come to an end, and the possible raising of the prime rate by the central bank. He said funds must be provided for SMEs from the budget, these funds must be cheap and subsidised, and the interest on them must be kept below half a per cent.

He added that Kavosz’s Széchenyi Card system is the most successful and most flexible system, through which the Growth Credit Programme now being phased out can be replaced.

He indicated that in this regard he would like to forge cooperation with the Hungarian Chamber of Commerce and Industry, and would be willing to offer the Chamber a large sum of budgetary funds in order to make such loans available to small and medium-sized businesses which are cheaper than those offered earlier, but comparable in size.

Mr Orbán said during the crisis almost everyone in Hungary stood their ground, there is not a single social group that broke down.

He highlighted it has been revealed that when necessary, the health care system does better than in many Western countries, and the level of organisation in health care as well as its capacity for making decisions and taking action are superior to those of some countries richer than us.

We had to change over to digital education overnight, and no one would have thought that this could be done this swiftly and effectively. Families likewise did not break down, despite the fact that many parents were compelled to stay at home with their children, he recalled.

The Prime Minister believes that the crisis also took its toll on businesses; however, employment figures show that the Hungarian people want to work and Hungarian businesses want to give them jobs.

The number of people with jobs currently stands at 4.5 million, and this is only 50,000 less than during the corresponding period of 2019, he pointed out, stating that this year we will have to replace not only these 50,000 jobs, but we should additionally create another 50,000 on top.

According to the Prime Minister, in the interest of protecting jobs, we must stand up against global corporate tax. He said there is not only a sovereignty problem with the global corporate tax; economic policy concerns emerge as well.

The low Hungarian corporate tax is favourable because it brings actual investments to Hungary. Anyone who wants to take this away from us is taking away from us the ability to attract real investments, he said. Therefore, we must have defence lines in place which preserve Hungary’s job protection capability even in the event of the introduction of a global corporate tax, he added.

The Prime Minister said “the million-dollar question is” what the world economy, the European economy and the Hungarian economy will be like after the crisis. He took the view that at this point in time no one in the world is able to offer an exhaustive and full answer. It is certain, at the same time, that the economy will change in the wake of the crisis, and Hungary will have to adapt to this smartly and well.

He took the view that both the European economy and the world economy will strive for stability and security.

“Therefore, we will all want a safer economy – a safer life and a safer economy – than we had before the crisis, an economy that cannot be shaken by the kind of crisis that we have experienced in the past 16 months,” Mr Orbán said.

He stated that striving for security means that in its defence against an epidemic, Hungary cannot depend on others, it must create its own self-defence, must be self-sufficient in personal protective equipment, medicines and vaccines, and this production capacity must remain available also at a time when there is no epidemic.

It is important that we swiftly develop a vaccine of our own against the next epidemic, and we must create a swift response capability, he stated.

In his view, the tenet of a safe economy will also be true of external relations, Hungary cannot stand only on its Western leg, the easterly direction is equally important, this is a fact of economic policy.

The world economy’s centre of gravity is gradually shifting towards the East, and we must adapt to this. We must find opportunities on the Japanese, South Korean, Chinese, Indonesian and Vietnamese markets because the money will be there, he stressed.

The Prime Minister urged a change of model in the tourism segment in Budapest. He said looking at the business models of capital cities attracting large numbers of tourists such as Paris or Rome, one can see that while the number of foreign tourists is higher, there is a healthier ratio between foreign and domestic tourists.

Ninety per cent of Budapest’s tourism relies on foreigners, and only 10 per cent on Hungarians which will not be competitive in the future, he stressed. In his view, Budapest will also have to create tourism facilities and services that will be used by Hungarians from the countryside. He hopes that the Budapest Chamber or professional organisations active in the field will present their proposals to the government.

He also said we need full employment for a safe economy. He added that “we don’t want to go back to socialism,” and so a safe job does not mean that everyone works for the same employer that first hired them for their whole life. They guarantee that there will be more jobs in Hungary than people wanting to work, and everyone will find jobs, he said.

Mr Orbán highlighted that one of the most important goals of the next seven-year EU budget is to allow regions in the worst situation to catch up because it is unacceptable that while Budapest is around 110 to 130 per cent of the European average level of development, four regions in Hungary are among the EU’s twenty worst-off regions.