Country Study, Hungary — страница 4

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Reduction Businesses view this set of taxes as equitable and do not squabble over the fairness of the taxes. They seem to be more interested in how to receive tax exemptions and want reform in the exemption granting side of the tax system (Newbery, 8). This is good because of the infectious shadow economy in other former soviet countries. This means that businesses will be more willing to pay taxes that are due to the government. So What Does this mean for Hungary? Newbery argues that the Hungarian tax system is at least as egalitarian as any where else in the world as far as an equal distribution of taxes. Especially since the method of redistribution is so good at keeping poverty remarkably low. While the transition still will put a gap between the “haves and the have

nots”, the government needs to keep its eye out for the most vulnerable such as the old and unskilled. Many argue that because of the rough transition people may become disillusioned with a market economy and never realize the gains that the countries leaders have fought so hard for. However with vigilance and a little bit of patience Hungary will reach its goal. Privatization In addition to using tax collection as a source of raising revenue, Hungary has turned to privatization to offset Hungary’s 31 billion USD national debt (Galai, 1). The sale of government controlled industries such as natural gas, oil, and electric powered utilities has earned the government over 1.4 billion USD in the past year. Recently the Hungarian Government decided to sale shares in eight of the

fourteen nationally owned electrical power and distribution companies. A German consortium agreed to pay 180 billion HUF for the shares and controlling interest in the former government controlled utilities. In addition to the sale of the utilities Hungary has had discussions about selling the National Bank of Budapest to investors. However analyst point out the bank will have to spend the next year fixing up the bank before they can think about selling it. Government officials would expect a heavy return if the bank were to be sold. While some analyst applaud the actions the government has taken others wonder who is really in control in Hungary. Is the government still calling the shots or is it the foreign investor with the most money invested in a majority of Hungary's'

industry. Another key step to Hungary’s transition to a market style economy is expenditure policy. Expenditure Policy Along with changing revenue policy expenditure policy is a crucial role of any government and especially important policy questions for governments in transition. Hungary’s main policy stance on expenditures is to try to match in-kind efforts and expenditure policy to specifically earmarked funds. Defense spending As mentioned in the introduction when Hungary decided to withdraw their membership with the Warsaw Pact they decided to drastically reduce their military expenditure. Hungary’s reduction in defense spending was a key decrease in fiscal consolidation to help decrease their ever rising budget defict. The graph in Fig. 1.5 represents Hungary’s

decrease in defense spending over the last ten years. Fig. 1.5 SIPRI Military Expenditure Database Social Welfare Reform Reforms to Hungary’s Social Welfare systems have been plentiful. Decreases in Welfare systems have mainly been reallocation of subsides on a stricter criteria basis. Hungary has made constant efforts to restructure social programs in which have proven to be ineffective. One example is the reform of the “Family Allowance System.” After a evaluation of the old program it was proven to be cost ineffective and replaced by a new “Family Support System”. This new “Family Support System” target families in need based more on income criteria and targeted people in the greatest need. Another key social expenditure reform was that of pension and health

programs.(CCET, 2) Pension and Health Programs Hungary experience great abuse in the areas of health and pension programs, but have taken steps in the right direction to help correct the situation. One such of these decisions was that of increasing the number of days employers are liable for sick pay. This reform travels in the right direction because the policy had reduced the Social Insurance Fund and also created minimum incentives for abuse of the system. Much more needs to be done in the way of pension and health reform however this policy shows a step in the right direction..(CCET,2) Expenditure Summary The underlying tone of Hungary’s expenditure policy is that of reducing the budget deficit without creating economic turbulence. Hungary faces many obstacles in trying to