Hungary has had four consecutive plans of fiscal adjustment which started in 2006 and were implemented by three governments and included an IMF-EU rescue package (2008).
General information and figures
Hungary has had four consecutive plans of fiscal adjustment which started in 2006 and were implemented by three governments and included an IMF-EU rescue package (2008).
Unemployment rate (June 2010): 11.2%
GDP (bn euro – 2010): 96.45
General Government Debt (2009 - % GDP): 78.4
Public deficit (2009 - % GDP): 4.4
Source: Eurostat
Public Employees
Freeze of nominal gross salaries for 2 years (2009-2010).
Revision of wage increments for the second half of 2009.
Abolition of 13th month salary, replaced by the introduction of a general incentive.
Cuts in social benefits
Sick pay is cut by 10% (from 70% to 60% and from 60% to 50%).
Family allowance was frozen for 2 years (2009-2010).
A cap was set for the duration of the maternity subsidy and maternity pay.
Housing subsidies have been frozen.
Reduction and gradual phasing out of gas and heat compensation payment.
Employers’ social security contributions were cut in 2009 by 5%.
Pension reforms
Retirement age will be raised to 65 from 2012.
Pension adjustments in 2009 were rescheduled.
Abolition of pension adjustments in 2010.
Abolition of the 13th month pension, replaced by a “pension premium” linked to GDP.
In October 2010, a temporary diversion of the second pillar mandatory pension contributions, from the pension funds to the State budget was put in place.
Cuts in public services, transfers and public investments
Public investments were cut from 2007: the construction of selected motorways has been finished, but no new projects have been started.
Tax changes
A 16% flat rate personal income tax rate was introduced in January 2011 while previous tax exemptions for low wage earners has been abolished.
The corporate tax rate will be decreased from the current 19% to 10% for all enterprises and a ceiling for social security contributions paid by employers will be introduced.
The overall budgetary effect of the tax reform will amount to a fall of tax revenues by cca. 4% of GDP for the year 2011.
A uniform VAT rate of 23% was introduced in 2007 instead of a differentiated rate of 15% (preferential) and 20% (regular). In 2009 the VAT rate was raised to 25%.
Special sectoral taxes were imposed on financial institutions, energy companies, telecommunications companies and retail chains for three years starting from October 2010.