The Hungarian SME Strategy, which was developed with the involvement of 1000 enterprises, was presented on Tuesday. In his opening lecture, Minister for Innovation and Technology László Palkovics said: “The reinforcement and increased export revenues of small and medium-sized businesses (SMEs) is being facilitated via training courses, digital development projects and tax cuts”.

“The government’s goal is for the adoption of the new SME strategy for the 2019-2030 period to reinforce small and medium-sized businesses, which employ the majority of people in Hungary”, he highlighted.

“The innovation and research & development activities of SMEs must be increased to enable them to appear on export markets with their own products”, the Minister pointed out.

“The main goal of the 2019-2030 SME strategy is the development of the economy and the improvement of the population’s quality of life. Based on the strategy, it is important to both establish an internationally successful group of dynamic Hungarian enterprises, and to reinforce the operations and society-organising role of small and medium-sized enterprises, which provide employment for the majority of Hungarian workers”, he explained. “It is important that Hungarian SMEs with growth potential become involved in the international distribution of labour, and realise their growth targets by doing so”, the Minister highlighted.

“SMEs also play an important role in job creation, and Hungarian enterprises have also contributed to the fact that there are now 833 thousand more people in employment in Hungary than in 2010. The development of small enterprises has been facilitated by the fact that the tax burdens of SMEs have fallen significantly, and this has also contributed to enabling the added value produced by SMEs to increase by 27 percent since 2010, and to them realising an increase in exports of over 45 percent”, the Minister pointed out.

“Between 2010 and 2018, the government has assisted the financing of SMEs with some 5000 billion forints (EUR 141.1 billion) of  preferential loans and capital, and at the end of 2017 over one third of the total 5545-billion-forint (EUR 16.5) loan and capital-type financing volume of Hungarian SMEs was backed by state subsidies”, Mr. Palkovics said.

“One of the problems with relation to the future development of SMEs is that the majority of family business are approaching a generational transition, and the strategy also aims to facilitate this process”, the Minister for Innovation and Technology pointed out.

Managing Director of the Hungarian National Bank Barnabás Virág said that in recent years the Hungarian economy has achieved strong growth, and Hungary is European champion with relation to the rate of investment, which hit 28.5 percent this year, and this trend is expected to continue in the near future.

He highlighted the fact that the National Bank’s growth loan programme (NHP) has facilitated the financing of thousands of small enterprises, and the NHP bond programme launched this year is also aimed at helping SMEs acquire funding.

State Secretary for Tax Affairs Norbert Izer from the Ministry of Finance explained that in addition to reducing tax and administrative burdens, tax policy is also focusing on promoting investment, whitening the economy, and facilitating the development of SMEs. Enterprises are not only being assisted by the fact that Hungary has the lowest rate of corporation tax in Europe, but also by favourable forms of taxation that are designed specifically for SMEs. From among these, the State Secretary highlighted the Small Business Tax (KIVA), the level of which will be further reduced from 2020. “The government plans to further reinforce this form of taxation to make it even more attractive for small and medium-sized businesses that have development potential”, he explained.

“We have realised a restructuring of the taxation structure that has enabled a reduction in taxes that is equivalent to 2 percent of GDP”, the State Secretary said, adding: “In recent years, the government has been able to spend the additional revenues derived from the whitening of the economy on reducing taxes”.

“In 2017, the level of tax centralisation to GDP in Hungary was 38.4 percent, and was 39.3 percent in the previous year, while in the European Union this index increased from 39.9 percent to 40.2 percent”, he stated.

“The further reduction in the volume of the black and grey economies will provide the room for manoeuvre for further tax cuts”, Mr. Izer highlighted.

With relation to further plans, the State Secretary said that the planned reduction in tax-related administration will be equivalent to another tax cut, particularly in the case of micro-enterprises, where the cost of tax administration is on overage 2.5 percent of their turnover.

“The plan is for the Tax and Customs Administration to prepare the tax returns of enterprises from 2021, in view of the fact that the tax office will have available all of the necessary data. Within this framework, the plan is for payroll processing software to be available to taxpayers by 2021, free of charge if required as in the case of online invoicing programs, with which enterprise will automatically fulfil their data provision requirements. Plans also include the fact that the tax authority will also be preparing the majority of VAT returns from 2021”, Mr. Izer indicated.