A job for Hungarian taxpayers can cost 360 thousand Euros

Last year, the government distributed HUF 1.700 billion (€ 4718 million)  in the form of investment aid, and a new job could cost taxpayers an average of 130 million forints (360 thousand Euros). This corresponds to an average gross wage of 27 years.

According to Népszava, in the last year before the pandemic, in 2019, the Ministry of Foreign Affairs and Trade distributed a total of HUF 105 billion (€ 291 million) to Hungarian and foreign investors for job creation and/or investment development support. At that time, creating a single new job cost taxpayers HUF 15.9 million (€ 44 thousand), which is the net salary of a skilled worker for at least three years.

The coronavirus epidemic has also brought about huge changes in the support program, which can be considered part of the “economic protection program”. According to Péter Szijjártó, Minister of Foreign Affairs and Trade, since the beginning of the epidemic, the Ministry has financed 1.434 investments worth HUF 1.676 billion (€ 4718 million). It was also found that companies are creating 12.603 new jobs and retaining 264.595. The subsidy per new job increased to HUF 132.9 million (€ 368 thousand) in 2020. This amount, calculated on the basis of the gross average salary of nearly HUF 400,000 (€ 1110) is the 27-year salary of an employee, which has raised serious questions about the government’s investment incentive policy.

The Ministry of Foreign Affairs assisted an investment with an average of HUF 1.1-1.2 billion ( € 2.7 million), the support intensity was 10-50 per cent, according to the Ministry’s announcements related to individual investments. Protecting jobs is the government’s communications panel, and companies have pledged, in exchange for state aid, not to reduce the statistical headcount. There has been no real survey of the number of redundancies planned out of the 264.000 ‘protected’ jobs before the aid was awarded, but presumably a fraction of that number.

This year, Péter Szijjártó will continue where he left off in December. On Tuesday, the government gave HUF 270 million ( € 749 thousand) to Heineken Hungária Sörgyárak Zrt.s HUF 540 million (€ 1498 thousand) investment in Sopron. In other words,

Hungarian taxpayers pay half of the investment costs to one of the world’s largest beer multiples.

The government can make such a high contribution because the European Union has temporarily suspended strict rules on illegal state aid because of the pandemic. Szijjártó justified the subsidisation of Heineken by strengthening its competitive market position – but did not explain why this is the task of Hungarian taxpayers. Szijjártó said that the Dutch company has undertaken to “protect” 465 jobs, in addition to buying raw materials from 85 per cent of domestic suppliers. The communication did not mention the creation of new jobs.

Last year, the Ministry of Finance headed by Mihály Varga did not work much cheaper in foreign affairs either: the government’s Corporate Investment Program belongs to the portfolio, under which only HUF 70 billion ( € 194 million) was paid to companies last year, of which nearly 700 new jobs are created by investors, which means 

 one job cost HUF 100 million (€ 277 thousand) for Hungarian taxpayers,

according to a Facebook video uploaded to the Minister of Finance’s website. The details also show that although the PM creates jobs cheaper – even if we can talk about it. Out of the HUF 70 billion ( € 194 million) subsidy, a HUF 155 billion ( € 430 million) development was created. The taxpayers accounted for 45 per cent for the subsidised investments.

There are even harsher support rates: In the middle of December, Masterplast Kft., Molar Chemicals Kft., and  Vajda-Papír KFt. received a total of HUF 9.2 billion ( € 25.5 million) in grants within the framework of the 50 billion Healthcare Support Program, With this support, an investment of HUF 11.4 billion ( € 31.6 million) was made.

That is, more than 80 per cent of the three investments were made by taxpayers, meaning that the three selected companies received virtually free money. It is not high-tech, as the three companies have received billions of taxpayers to manufacture sanitary masks, protective clothing, hygiene devices and disinfectants.

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It would not be applicable in government support programs alone, but the Hungarian government supports certain companies, multis and some Hungarian companies dealing with fire extremely gallantly, said László Molnár, CEO of GKI Gazdaságkutató Zrt. The subsidy of one hundred million forints per job is twenty years’ wage cost, he added. Meanwhile, the government is rather narrow-minded in helping Hungarian companies that would have needed temporary support due to the crisis. As a workplace, the government give a monthly wage subsidy of 170 thousand forints, which is not so much. They let the existing jobs be lost, but on the other hand, giving a hundred million forints to a new job is an incredibly wasteful economic policy, László Molnár added.

Although investment subsidies temporarily increase the gross national product, GDP at high depreciation and profit margins, because they do not create many new jobs, the state does not generate significant tax revenue. Besides, these investment grants, even if they create new jobs, are in the rarest of cases, high value-added jobs, most of which are three shifts, with a continuous work schedule. In other words, the government supports the exploitation of the Hungarian workforce by the multis, a tangible sign of which is the strikes that have taken place in recent years at some large Hungarian companies—besides, most of these multis produce from imports and not from domestic raw materials.

It is a bit better if food companies receive support, because then at least the raw material is domestic, and thus the support would have a spill-over effect.

Molnár mentioned one exception within the financial protection measures, which he sees as making economic policy sense; this is the preferential loan program of the Magyar Nemzeti Bank (MNB). Within the framework of the Growth Loan Program, viable, but capital-deficient Hungarian companies are supported with extremely cheap loans – up to a maximum of two per cent. Instead of the government’s investment incentive program, this loan program should be continued, the CEO of GKI added.

The consequence of the government’s investment promotion policy is that the taxes paid by Hungarian people and companies support the investments of multis although the opposite should be the case: domestic companies should be supported from the taxes paid by multis. It is difficult to understand what the government aims for with these unrealistically high state subsidies beyond political gain. It can be seen that at the press conferences, in many cases in the role of the cashier, local Fidesz representatives also appear in addition to the Minister.

Source: Népszava