Speaking after an extraordinary cabinet meeting, Matolcsy unveiled Ft 367 billion of austerity measures less than two weeks after a similar Ft 397 billion package to keep the budget deficit below 3% in order to escape punishment under the EU’s excess deficit procedure.

The government has also cut its 2013 growth forecast from 1.0% to 0.9%.

The European Commission informed the government in a letter received on Monday that only two-thirds of the fiscal readjustment programme announced on October 5 could be achieved, and that without further adjustments the deficit would rise to 3.7-3.9% of GDP in 2013, Matolcsy told reporters.

The government will implement the measures to ensure that the excess budget deficit procedure against Hungary is lifted, Matolcsy said, as he criticised the EU's assessment.

Specifically, the EU found the government's 2013 revenue target unjustified, in part because it counts on Ft 93 billion in additional tax revenue from the monitoring of cash registers by installing computer chips in them, Napi Gazdasag writes.

Matolcsy said 90% of the steps announced yesterday will hit larger companies.

The financial transaction tax will be raised from 0.1% to 0.2%, generating Ft 90 billion more from banks and Ft 40 billion from the State Treasury.

The decision not to halve the bank tax, in violation of an agreement with the Banking Association, is expected to bring in an additional Ft 72 billion in 2013.

Matolcsy said the tax office will boost VAT revenues by Ft 60 billion through stricter enforcement and closer checks of all payments above Ft 2.5 million, compared to the current Ft 10 million minimum.

The social security contribution on fringe benefits, payable by employers, will be lifted from 10% to 27%, raising the total tax burden on these payments to 34%.

Energy and utility companies will pay an additional Ft 30 billion in the form of a tax on pipelines.

Companies, especially wholesalers, will have to pay more local business tax in the future, as tax deductions will be cut back.

Source: Hungary Around the Clock

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