Election campaign reached fiscal policies yesterday

HUNGARY - In Brief 10 Jun 2021 by Istvan Racz

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Yesterday, PM Orbán announced that the government is proposing to return one-year's income tax to taxpayers raising children in early 2022, provided that the economy proves to be going well this year. Later in the day, Márton Nagy, formerly MNB vice governor and currently an advisor to the prime minister on economic policy, clarified the details. He said that the government would return the amount of this year's income tax liability, grossed up with tax benefits, up to a maximum amount of HUF800 thousand per person, to all taxpayers raising at least one child in their households, provided that 2021 real GDP growth reaches 5.5%. This means a one-time income transfer to 1.1 million families and to 1.5 million taxpayers, as in a household with two parents, both of the latter would get the transfer. These transfers would be paid out in early 2022, meaning exactly before or around the upcoming parliamentary election.The fiscal cost of this action is estimated at HUF600bn or 1% of GDP, meaning that the average size of the transfer would be HUF400 thousand per recipient. Mr. Nagy explained that half of this would be covered out of the tax consequences of the extra 1.2%-point GDP growth over the originally projected 4.3% growth rate, on which this year's government budget was based. The other half would come partly from the use of fiscal reserves and from the redirection of spending on other purposes, without affecting the fiscal deficit target of 5.9% of GDP for 2022. The total amount of the income transfer in question would represent about one-fifth of the budget's annual revenue from the income tax.One thing which Mr. Nagy did not mention at all was what would happen if thi...