Part I — Situation overview

On 8 October 2026, after a two-week series of talks in Budapest, experts from the International Monetary Fund (IMF) published their preliminary findings. According to Portfolio’s summary, this year’s budget deficit may reach 7–7.5 per cent of gross domestic product (GDP), public debt will keep rising, and growth may be around 2 per cent this year and around 2.5 per cent over the medium term. According to the IMF, Hungary has the least progressive tax system in the OECD, and the low, flat-rate personal income tax (PIT) and corporate tax bring in less revenue than needed. It therefore proposes a progressive PIT with a tax credit for low earners, replacing the family allowances with a per-child tax credit, a higher corporate tax rate with full investment expensing, and narrowing the reduced VAT rates. On the spending side, it recommends a gradual phase-out of energy-price support and the subsidised loan programmes, savings in public procurement and restraint in wage-related spending. By their calculation, this could reduce the deficit to 5 per cent by 2027 and to 3 per cent by 2029. They called the release of some €16 billion in EU funds, equivalent to 7 per cent of GDP, a “unique opportunity”.

In recent weeks MIAK has made several budget proposals. On 24 September it called for a consolidation map by income decile, on 3 October for a cost table for each promise, and on 6 October for quarterly accounting against the path. The IMF package creates a new situation. According to ATV, Finance Minister András Kármán himself called the inherited tax system disproportionate and unfair at a background briefing on the same day, because lower earners pay a larger share of their income in tax. The 2027 budget will be submitted at the end of October. Meanwhile, Magyar Nemzet wrote that an external loan to pre-finance EU projects may have come up at the cabinet meeting in Erdőbénye, and that the ministry did not answer the paper’s questions.

MIAK’s reading: the IMF’s direction coincides at many points with MIAK’s G3 progressive tax reform programme point. The risk lies not in the content of the proposals but in how they are handled. If the government adopts or rejects the package without comment, the reform loses either legitimacy or its professional foundation.

Part II — Grounding in the literature

Three sources provide the interpretive framework. Joseph E. Stiglitz, American economist, 2001 winner of the Nobel Memorial Prize in Economic Sciences and former chief economist of the World Bank, criticises the Fund’s practice from the inside in his book Globalization and Its Discontents. In his view, conditions imposed from outside often fail, because they are abandoned when a new government comes to power. Good policy cannot be bought; the government has to take it on as its own. Thomas Piketty, French economist and leading researcher of long-term data on wealth inequality, shows in Capital in the Twenty-First Century that the progressivity of a tax system is determined by all payments taken together. Because of allowances and the weight of consumption taxes, the system can become regressive at the top of the income scale. The International Monetary Fund’s October 2025 Fiscal Monitor report describes the spending review as one of the strongest tools for using public money more efficiently, and cites the example of Slovakia. Taken together, the three sources say: the content of the reform may be good, but it only lasts if the government decides on it item by item, through its own deliberation, and knows on both the allowance and the spending side what each item costs and whom it helps. The detailed discussion of the literature — source by source, with quotations — is in section 6.4 Literature in detail.

Part III — MIAK’s concrete proposal

MIAK proposes three measurable steps. The first sets out how the IMF package is to be handled, the second makes tax-side allowances visible, and the third launches a review of the spending side.

3.1 An item-by-item response annex to the IMF and OECD recommendations for the 2027 budget bill (together with the submission, by the end of October)

MIAK proposes that the Ministry of Finance attach a short, tabular annex to the 2027 bill. It should include every IMF recommendation, as well as the tax and pension recommendations of this year’s OECD country report. According to Magyar Nemzet, the OECD also proposes a more progressive PIT, a review of tax allowances and raising the retirement age. Each row should contain five items. First: the government’s decision, i.e. whether it adopts, partly adopts, defers or rejects the recommendation. Second: a short justification. Third: the impact on the 2027 budget. Fourth: the direction of the distributional impact by income decile, consistent with the consolidation map proposed on 24 September. Fifth: if the decision is to defer, the planned date. The annex should also include a financing statement. In it, the government should state whether it is considering a loan from an external, international institution, and how large the need for pre-financing EU projects will be in 2027. This is part of the G23 debt sustainability framework. The proposal does not strengthen the IMF’s authority; quite the opposite: according to Stiglitz (see 6.4.1), it is precisely conditions that come from outside and are not made one’s own decision that prove fragile. If the government decides line by line and in public, the reform becomes its own, and voters can also see what it rejects and why.

3.2 A tax-expenditure inventory with revenue forgone and distributional impact (first edition by 31 March 2027, thereafter as an annex to every budget bill)

Several of the IMF’s proposals mean not a new tax but the narrowing of an existing allowance: the reduced VAT rates, the family tax allowance and the interest subsidy on subsidised loans. MIAK proposes that the Ministry of Finance publish an inventory of all tax allowances by 31 March 2027. These include the reduced VAT rates, personal income tax exemptions and allowances, the family tax allowance, corporate tax allowances and the interest subsidies of the loan programmes. For each item, the inventory should show the annual revenue forgone, the number of beneficiaries, the distribution of the allowance by income decile, the original purpose and the date of the last impact assessment. According to Piketty (see 6.4.2), the tax system can be regressive at the top incomes because of allowances. That is why progressivity is only worth debating together with the allowances. The inventory is at the same time a precondition for any reshaping of family support. The IMF’s proposal, i.e. replacing the family tax allowance with a tax credit, could benefit low-income families with several children, but could cause losses for some middle-class families. According to MIAK, this should only be launched after the DM2 family support impact assessment, with transitional protection for existing beneficiaries. The tax credit for low earners could encourage work, in line with the self-reliance incentives of FO11. This effect must also be measured.

3.3 A Slovak-style spending review programme, in the first round covering the subsidised loan programmes and energy-price support (results by 31 March 2027, incorporation into the 2028 budget)

According to the IMF, subsidised corporate lending reaches more than half of companies, yet it has not improved efficiency. A gradual phase-out would save some 300 billion forints a year. MIAK proposes that a spending review unit be set up in the Ministry of Finance this year. In the first round it should examine two areas: the subsidised corporate and housing loan programmes, and energy-price support. For each programme, the review should record the cost, the objective, the measured result and a scenario for phasing it out or reshaping it. The report should be published by 31 March 2027, so that it can already feed into the planning of the 2028 budget. According to the Fund’s report (see 6.4.3), Slovakia has carried out 19 such reviews since 2016, covering almost two-thirds of public spending and identifying savings potential equivalent to 7 per cent of total spending. For energy-price support, MIAK already proposed a consumption-band system on 3 October. The review provides its quantitative basis. This is the first large-scale application of the G20 ex-post impact assessment system, i.e. the Drucker audit.

One principle links the three proposals: the sequence of the adjustment matters. First, the cost and benefit of existing allowances and spending should be known; only then should the rates change. In this way the reform becomes not the wish list of an external institution but the Hungarian budget’s own decision, framed also by the G15 countercyclical rule (public spending in a downturn, saving in an upswing): the pace of consolidation should not stifle growth of around 2 per cent.

Part IV — Expected effects and risks

Dimension Expected effect Risk
Budget The deficit path is backed by itemised, verifiable decisions; the cost of allowances becomes visible The inventory and the review take time; in 2027 the savings may still be small
Society The distributional impact is known; the losers can be identified and protected in advance A public list may trigger an interest-group dispute around every allowance
Families Reshaping family support only starts with an impact assessment and transitional protection Postponing the reshaping also delays improving progressivity
Companies Subsidised loans are phased out at a predictable pace Ending the loan programmes may also hold back investment in the short term
Financial stability and trust The financing statement reduces speculation about a possible external loan An honest statement may also attract attention on the markets if it shows a large pre-financing need

The most important dilemma is timing. The IMF would already cut the 2027 deficit to 5 per cent, while MIAK proposes that the deeper tax-side restructuring come after the inventory and the review. The two are compatible if the 2027 budget starts with the items that can be phased out quickly, such as stopping new contracts in the loan programmes, while rate changes move to 2028. The second dilemma is publicity. An item-by-item response is a political risk, because every rejected recommendation can be held against the government. According to MIAK, this risk is smaller than the risk of silence, in which the debate plays out between the slogans of “IMF diktat” and “IMF expertise”.

Part V — Measurability and summary

5.1 What is worth following? (suggested KPIs)

MIAK suggests the following key performance indicators (KPIs). These are suggested indicators, not government commitments.

  • Existence of the item-by-item response. Target: the response annex for each recommendation and the financing statement are published together with the 2027 budget bill, by the end of October.
  • The tax-expenditure inventory. Target: published by 31 March 2027, with the revenue forgone and the distribution by income decile for every item.
  • The spending review. Target: the report on the first two areas by 31 March 2027, with the proposed savings incorporated into the 2028 budget. It is worth following how much of the some 300 billion forints a year estimated by the IMF is actually realised.
  • The deficit path. It is worth following whether the 2027 deficit meets the target set in law, and how much of the adjustment is lasting.

5.2 Summary

MIAK’s request is addressed to the Government and the National Assembly. By the end of October: an item-by-item response to the IMF and OECD recommendations alongside the 2027 budget, with budgetary and distributional impacts, plus a financing statement. By 31 March 2027: an inventory of all tax allowances, and the first spending review of the loan programmes and energy-price support. Reshaping the family tax allowance should only start after an impact assessment. The IMF’s proposals are a good starting point, but the decision has to be made by the Hungarian budget, with visible reasons.

Of MIAK’s foundational values, data-drivenness and ideology-free decision-making are at stake here. Data-drivenness, because neither adopting nor rejecting the IMF package can be a matter of faith: every item must be decided on the basis of its cost and distributional impact. Ideology-free, because the item-by-item response takes the debate out of the slogans of “IMF diktat” versus “international expertise” and keeps it on the concrete measures.

Part VI — Reasoning and further sources

6.1 Press framing by spectrum

In the economic band, Portfolio framed the package as a “drastic tax reform”, but the article listed the IMF’s findings matter-of-factly. It also highlighted the positive elements: the market welcomed the new government’s commitment, and the release of EU funds offers an opportunity. Another, subscription-only Portfolio article calculated the valuation rules of the wealth tax for listed companies. In the conservative band, Magyar Nemzet described the proposals as “brutal austerity” and a “wish list”. The paper highlighted linking the retirement age to life expectancy, abolishing Otthon Start and the possible privatisation of state-owned companies. A separate article took the Ministry of Finance to task for not answering a question about a possible IMF loan. A third listed the international failures of the wealth tax.

In the public-affairs band, 24.hu and ATV reported on András Kármán’s background briefing. These articles presented the government’s own tax package: the wealth tax, the expansion of the itemised tax for small taxpayer enterprises (KATA) and the tightening of the simplified public contribution (EKHO). ATV also quoted how the minister justified the unfairness of the tax system. Government communication did not respond directly to the IMF package. In the left-liberal band, HVG wrote about a capital shortfall of some 3,300 billion forints in the first-half balance sheet of the Magyar Nemzeti Bank (MNB), the central bank. This shows another constraint on fiscal room for manoeuvre. The article is subscription-only; the blog post relies on the public introduction. MIAK’s press monitor did not record Telex or 444.hu articles on the IMF mission on this day.

6.2 Facts and data

Preliminary findings of the IMF mission (based on the summaries by Portfolio and Magyar Nemzet):

Data or recommendation Value Source
2026 deficit 7–7.5% of GDP Portfolio
Growth 2026: around 2%; medium term: around 2.5% Portfolio
Inflation below the central bank target this year, may rise to near 3% in 2027 Portfolio
Proposed deficit path 2027: 5%; 2029: 3% Portfolio
Released EU funds some €16 billion, 7% of GDP Portfolio
Tax system the least progressive system in the OECD Portfolio
Subsidised corporate loans reach more than half of companies; phasing them out would save some HUF 300 billion a year Portfolio
Base rate 5.5% after this year’s 100-basis-point cut, close to the neutral level Portfolio
Inflation target falls from 3% to 2.5% from January 2028 Portfolio
Government securities on bank balance sheets 17% Portfolio
Pension and healthcare spending rises by almost 4 percentage points of GDP by 2050 Magyar Nemzet
Impact of the full reform package real GDP up to 2% higher by 2030 Portfolio

The government’s parallel tax package (András Kármán, 8 October):

Element Data Source
Wealth tax HUF 200 billion in revenue a year 24.hu, ATV
KATA expansion budget-neutral according to the ministry’s estimate 24.hu, ATV
EKHO a uniform HUF 60 million threshold; affects 200 taxpayers among professional athletes 24.hu, ATV
2027 budget submission at the end of October 24.hu, ATV

Other: according to HVG, the MNB’s first-half balance sheet shows a capital shortfall of some 3,300 billion forints.

6.3 Policy dimensions

  • Economy (programme points) — the IMF proposals touch on progressive tax reform (G3), the debt sustainability framework (G23), the countercyclical stabiliser (G15) and the impact assessment system (G20);
  • Social policy (programme points) — replacing the family tax allowance with a tax credit follows the distributional logic of targeted support (SZ1);
  • Employment policy (programme points) — the tax credit for low earners, as a work incentive, falls within the scope of self-reliance incentives (FO11);
  • Demography (programme points) — a family support impact assessment (DM2) is mandatory before any reshaping of family support.

6.4 Literature in detail

6.4.1 Joseph E. Stiglitz: Globalization and Its Discontents

As chief economist of the World Bank, Stiglitz saw the Fund’s programmes at close range. His main objection is that the programmes applied a single recipe and rarely examined what they did to poverty or what alternatives existed. On loan conditions, he writes that they not only caused resentment but also failed to bring development:

“Good policies cannot be bought.”

In other words, good policy cannot be bought. According to Stiglitz, some of the conditions were wrong from the start, while others failed because a condition imposed from outside was abandoned when a new government came to power. Countries experienced them as a violation of their sovereignty. Hungary today receives not recommendations under a loan programme but advice. Stiglitz’s thesis nevertheless holds: a reform lasts if the government takes it on as its own decision, through public deliberation. The item-by-item response annex of 3.1 makes this possible. It is neither the IMF that dictates nor reflexive rejection that decides, but the Hungarian budget, line by line.

📖 Source: Joseph E. Stiglitz: Globalization and Its Discontents (W. W. Norton, 2002)

6.4.2 Thomas Piketty: Capital in the Twenty-First Century

In Chapter 14, Rethinking the Progressive Income Tax, Piketty examines the total tax burden rather than individual taxes separately. He distinguishes between proportional, progressive and regressive taxes. He stresses that a tax can become regressive even when the wealthier enjoy some allowance, whether through tax law or tax avoidance. Citing a 2010 French survey, he shows that the tax burden of the lowest-earning half is raised by the heavy weight of consumption taxes and social contributions, while for the top layers the total burden decreases. This directly explains the IMF’s finding and András Kármán’s reasoning: the Hungarian system is made only weakly progressive not just by the flat-rate PIT, but also by the weight of consumption taxes and the structure of allowances. That is why proposal 3.2 asks for an inventory of allowances before the rates. The cheapest and least distorting way to improve progressivity is often not raising rates but narrowing the allowances that favour top incomes.

📖 Source: Thomas Piketty: A tőke a 21. században (Kossuth Kiadó, 2015; original: Le Capital au XXIe siècle, 2013)

6.4.3 International Monetary Fund: Fiscal Monitor — Spending Smarter

The Fund’s October 2025 report examines the efficiency and composition of public spending. It deals with spending reviews in a separate box:

“Spending reviews are a powerful tool for optimizing the use of public resources. When well-designed and integrated into budgetary processes, they can help identify savings and improve program effectiveness.”

In other words: spending reviews are strong instruments for making the best use of public money; well designed and built into the budget process, they help find savings and improve the effectiveness of programmes. The report states that the review should be carried out at the start of the budget cycle, so that it underpins strategic planning and spending ceilings. Slovakia launched its programme in 2016 and has carried out 19 reviews since then. These covered almost two-thirds of public spending and identified savings potential equivalent to 7 per cent of total spending. For the Hungarian situation, the most important lesson is timing. If the first review is completed by March 2027, it will be available at the start of planning for the 2028 budget. Proposal 3.3 therefore ties it to this deadline.

📖 Source: International Monetary Fund: Fiscal Monitor — Spending Smarter: How Efficient and Well-Allocated Public Spending Can Boost Economic Growth (October 2025)

6.5 International comparison

The closest model is Slovakia, whose spending review programme is described in 6.4.3. Hungary’s neighbour has been carrying out reviews continuously since 2016, aligned with the budget cycle, and a 2020 review also made proposals for restraining the public-sector wage bill. The lesson of the programme is that a review is not a one-off austerity package but a regular instrument.

According to MIAK’s background knowledge, there are models for a tax-expenditure inventory in several EU member states. Germany’s federal government produces a subsidy report every two years that also presents tax allowances item by item, and several OECD countries publish estimates of tax expenditures as part of their budget documentation. The recommendations of the Fund and the OECD coincide in this direction: an allowance is just as much public money as spending, so it must be just as visible. The blog post draws this parallel not from the current press sources but from background knowledge.

Economy

  • G3 — Simplification of the tax system and progressive reform
  • G15 — Countercyclical fiscal stabiliser
  • G20 — Economic policy impact assessment system (Drucker audit)
  • G23 — Public debt sustainability framework

Social policy

  • SZ1 — Targeted support

Employment policy

  • FO11 — Self-reliance incentives — preventing welfare dependency

Demography

  • DM2 — Impact assessment of family support

Proposed new programme point: Annual tax-expenditure inventory and regular spending review programme — for the Economy area.

6.7 List of sources

Press sources (MIAK press monitor, 9 October 2026 — topic 2):

Knowledge-base references (books):

  • 📖 Joseph E. Stiglitz: Globalization and Its Discontents
  • 📖 Thomas Piketty: A tőke a 21. században (Capital in the Twenty-First Century)
  • 📖 International Monetary Fund: Fiscal Monitor — Spending Smarter (October 2025)

MIAK internal materials:

  • MIAK policy area: Economy (programme points; programme point ID: G3, G15, G20, G23)
  • MIAK policy area: Social policy (programme points; programme point ID: SZ1)
  • MIAK policy area: Employment policy (programme points; programme point ID: FO11)
  • MIAK policy area: Demography (programme points; programme point ID: DM2)
  • MIAK press monitor, 9 October 2026 — topic 2, score: 90/100

Supplementary public data sources (if used):

  • Suggested data sources for follow-up: the concluding statement of the IMF mission (imf.org), the 2027 budget bill and its explanatory memorandum, the financing plan of the Government Debt Management Agency (ÁKK), the MNB’s half-yearly report, the OECD’s country report on Hungary

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