Economy minister: Government aims for lower VAT, but “now is not the time”

Budapest, April 21 (MTI) – Hungary’s government aims to reduce the 27 percent general value-added tax rate in the long term, though “now is not the time” for a cut, Economy Minister Mihály Varga said in an interview in the fresh issue of business weekly Figyelő.

“It would be nice if the VAT rate could be reduced and the top rate brought to 25 percent or lower. This is in line with the cabinet’s long-term intentions, but now is not the time for this. There is opportunity for targeted steps,” Varga told the paper.

Hungary’s government recently announced plans to reduce from next year the VAT rate for milk eggs and poultry to 5 percent, while cutting the rates for catering and internet service to 18 percent.

Varga explained the decision to reduce the rate for catering citing the impact of Hungary’s strong tourism sector on catering. “Much of the fiscal revenue from tourism flows in through catering services. We believe that the lower tax will generate larger turnover,” he said.

Asked why the VAT rate for bread was not reduced, Varga said the broad selection of baked goods in Hungary posed a problem. “Where do we classify langos?” he asked, referring to a savoury donut popular among Hungarians.

Commenting on the government’s announced aim to bring the personal income tax rate into the single digits from 15 percent at present, Varga said he “very much hopes” that there will be an opportunity to cut the rate sooner than 2020. But he noted that every percentage point reduction in the PIT rate results in a 120 billion forint (EUR 387m) fall in budget revenue.

“We decided that it was more important now to ease the public burden with regard to staples. Not only in the interest of consumers, but because we can support the sector’s producers, too,” Varga said.