The new tax introduced by the 18th district of Budapest will mean that everybody will have to pay more for the plane ticket since part of the price will go to the local budget. The only exemptions will be the residents of the district and those below 18. The local council says the Hungarian finance ministry gave green light on the idea, but airlines and ground handling companies are outraged. There is still a huge question mark behind the measure, but the district seems determined and would like to start taxing the airport passengers from 1 January. Below you may read the details.
The idea of the so-called “passenger tax” appeared first in end-November as a reaction to the soaring energy prices, skyrocketing inflation and other growing expenditures of the 18th district local government. Since the government keeps the local governments’ income low, they need to find new ways to provide enough money for their operation, Telex.hu wrote. The idea of the 18th district is one of a kind for sure.
The opposition-led local council already accepted the relevant decree, and one of the deputy mayors said the finance ministry gave the green light.
However, Telex said that airlines and ground handling services are critical towards the idea. If nothing changes, all passengers will have to pay more from 1 January.
Gergely Juhász, a taxation expert of PwC, told Telex that local governments received extensive rights for taxation under the Orbán cabinet. That means they can introduce so-called “local taxes” on activities happening in the district. The only condition is the obligation to avoid double taxation. As a result, some local governments wanted to tax plants growing in the fields and even transmission towers.
The most problematic issue with the 18th district’s new tax idea is double taxation since every passenger pays the so-called excess profits tax (departure tax) introduced by the government. There are no exemptions in that respect.
Celebi, a ground handling service provider being a market leader at Budapest Airport, said it is unrealistic for them to collect the tax for the local government. They said they were not in contact with the passengers arriving except for lost baggage. “We would not like to collect money”, they highlighted.
Budapest Airport turned to the government office. They said such a tax would have affect the traffic and tourism sector considerably. Moreover, uncertainties around the new decree could result in flight cancellations, they said.
They argued the decree would result in the double taxation of the passengers. Furthermore, collecting the new tax would be impossible in case of an online check-in or an arriving passenger, for example. Wizz Air said the same, adding the new tax would only create additional obstacles and hinder the strengthening of the sector. They highlighted they would do everything to kill the implementation of the decree.
Others said local governments need to try everything to increase their income. The worst-case scenario is that they would need to withdraw the measure.