How to introduce result oriented budgeting in Hungary – a proposal

Abstract

In Hungary, as in many other developed and converging countries, the revenue side of the budget is expected to shrink and its expenditure side to expand in the forthcoming decades unless measures are taken to prevent this development. International tax competition will enforce the lowering of tax rates, e-commerce will slash VAT revenues that can be collected, the free movement of labour and capital will facilitate tax avoidance, environmental problems will hike health expenditures and curb economic growth while the heightened quality expectations of citizens will boost the costs of public services. In order to bridge the ever growing gap between shrinking revenues and increasing expectations and to prevent the resulting continuous quality deterioration of public services, governments need to address the related problems at the root (e.g. the sustainability of the pension system should be assured primarily through changing the pension rules themselves). Nevertheless, improving the efficiency of public functions may also contribute perceivably to alleviating the pressure on the budget.