BUDAPEST (Reuters) — Hungary's government plans to boost jobs by cutting employers' social taxes for some workers, according to local business website Origo.hu, a move that could complicate the country's efforts to avoid EU budget penalties.
The government, whose economic policies have alarmed investors and complicated talks with potential international lenders, is losing public support and struggling to avoid a recession this year.
Its employment-boosting plan could cost the state up to 250 billion forints ($1 billion), Origo said, citing unnamed government sources. It also said Hungary — which already levies Europe's highest bank tax — could finance the rebates with higher revenues from a tax on financial transactions.
The program's main goal would be to create jobs for people fresh out of school, employees older than 55, unskilled workers, and women returning from maternity leave by giving employers big rebates on their 27 per cent social security tax contributions.
Hungary, central Europe's most indebted nation, must keep its budget deficit below the EU's three per cent ceiling to escape penalties under the Excessive Deficit Procedure it has been under ever since joining the 27-member bloc in 2004.
The country targets a deficit of 2.5 per cent of economic output this year, and 2.2 per cent next year.
Origo said the details of the employment program were yet to be finalized.