OECD acknowledges Hungary reforms, makes further recommendations

Budapest (MTI) – The OECD acknowledged structural reforms Hungary’s government has undertaken over the past two years in a report on Friday, but said there is still room to reduce bureaucracy for businesses, improve competition in the service sector and reduce the tax wedge on wages.

In its latest “Going for Growth” report, OECD recognised steps Hungary has taken to ease administrative burdens for businesses but recommended the country improve the transparency, stability and formulation of regulatory policies. Hungary’s Competition Office should become more involved with the legislative process and a dedicated anti-corruption agency should be established, it added.

The OECD said there is “insufficient competition” in retail, professional services and network services and recommended removing sector exemptions, taking a tougher stand on mergers, lowering barriers to entry in the retail sector and facilitating entry of mobile virtual network operators on the telecommunications market. It also urged the introduction of market-based energy pricing.

The OECD noted that the tax wedge on wages and salaries had been lowered through a reduction in the personal income tax rate and would be cut further by expanding tax allowances for families with children. But it recommended cutting the wedge on lower salaries further through better targeting and the introduction of an employment tax credit that progressively declines with wage levels.