Hungary's new job growth plan, says PM Orbán

In Hungarian Parliament on Monday, Prime Minister Viktor Orbán presented a program to increase jobs, consisting of ten points including major cuts in social security contributions and new simplified taxes for small businesses.

In his parliamentary speech, the Prime Minister responded to comments by opposition party leaders, by defending the flat tax regime and the mortgage payoff scheme, as well as taking a stand in support of Economy Minister György Matolcsy and his economic policies.

After talking about the results of last week's EU summit, the Prime Minister presented his government's new job protection program that will take the form of an unprecedented tax cut in social security contributions, the Prime Minister claimed. The cost of the new program is HUF 300 billion (roughly EUR one million), which is to be funded from the recently proposed financial transaction tax.

The first 5 points of the program are aimed at reducing the social security tax and vocational training contributions for 5 high priority employee groups in the income bracket of a gross HUF 100,000 per month.

The government is proposing to fund the HUF 300 billion project in 3 equal parts from (1) transaction tax to be collected from the Central Bank, (2) transaction tax to be collected from the State Treasury, (3) borrowed reserves.

The 10-point agenda

(1) Employees under 25: government to cut employers' social security contributions by 50%.

(2) Employees over 55: employers' social security contribution likewise to be cut by 50%.

(3) Unskilled workers between 25 and 54 years (FEOR Group 9): employers' social security contribution to be reduced by 50%. The Prime MInister claimed this will assist the employment of 250,000 people.

(4) Permanently unemployed: employers' social security contribution to be eliminated altogether in the first two years. In the third year and afterwards, the contribution will be 50% of the current rate.

(5) Mothers returning to the workforce from maternity benefits: no employers' social security contribution to be paid in the first two years. In the third year and afterwards the contribution will be 50% of the current rate.

(6) Micro businesses: optional simplified flat tax in order to reduce the amount of paperwork for businesses with less than HUF 6 million revenue per annum. Those opting for the simplified tax will be required a flat tax of HUF 50,000 or HUF 25,000 per month depending on whether this is their sole source of income or a "second job". The new simplified tax will replace corporate tax as well as personal income tax and social security contribution. Those eligible for the flat tax include the self-employed in addition to two types of micro businesses. In the latter's case, the flax tax will eliminate the need to prepare an annual earnings report, the PM said.

(7) Small businesses: a new SME tax to replace corporate tax, personal income tax, vocational training contribution, and healthcare contribution on dividends. The aim is to enhance the role and weight of SME's in the national economy. The tax base is profit plus the aggregate wage cost of employees, taxed at a flat rate of 16%. Orbán said this new tax could benefit up to 300,000 citizens.

(8) Cash accounting of VAT: businesses with less than EUR 500,000 sales revenue not to be obligated to pay VAT until they have received payment for goods or services.

(9) Easing accounting rules to help businesses struggling as a result of currency exchange rates. New accounting rules need to be put in place, which make it possible for capital losses resulting from exchange rate fluctuations not to be taken into consideration when the capital strength of a business is assessed in 2012 or 2013.

(10) Easing petty cash box rules. The current rules are overly restrictive and should be done away with, the PM said.

(source: portfolio.hu)