Political daily Népszava speculates that the government would accept the recommendation of the National Interest Coordination Council to raise the middle and top VAT rates by 3% to 18% and 23%, respectively, instead of raising the middle rate only from 15% to 20%, as originally planned.
The representatives of employers have proposed to raise the 15% VAT rate by just 3% in order to ease the burden on lower income families, as most basic everyday household goods are taxed at 15%.
The increase of the higher (headline) VAT rate is certainly favorable from a budget point of view. Please note, however, that the government just cut it from 25% to 20% in January and the frequent changes do not support fiscal policy credibility, in our view.