As a result of the newly introduced excess profits tax, the price of medicine, foodstuff, air travel and tobacco is projected to rise significantly in the near future. According to the Minister of Economic Development, the government will act if companies try to pass the burden on to the public.
The government declared a state of war on 24 May “to protect families, pensioners, jobs and rental cuts.” According to the official announcement, the government has decided to create new budget funds to cover the overhead cuts and finance the cost of strengthening the defence forces.
For the period of two years, banks, insurance companies, large retail chains, energy and trading companies, telecoms and airlines will be required to pay a large part of their excess profits into these two funds, including EUR 154 million (~ HUF 60 billion) in the case of the retail sector.
As the Hungarian news portal Piac&Profit reports, in the retail sector, the current tax rates are being increased in proportion to the revenues. For taxpayers who earn above EUR 256,7 million (~HUF 100 billion) net sales revenue, the current rate is 2.7% but this will increase to 4.1%. The tax rate in the EUR 77-256,7 million (~HUF 30-100 billion) net sales revenue bracket is 0.4% which will rise to 1%.
The newly introduced “excess profits tax” is promised to be only temporary. The government expects to raise additional tax revenue of around EUR 2 billion (~HUF 800 billion) from companies in specific sectors of the economy in the next two years, plus an additional EUR 256,7 million (~HUF 100 billion) through other small tax increases – reported by Portfolio.
According to analysts, the new taxes are likely to affect the consumers as well.
In addition to inflation, the excess profits tax could lead to significant price increases in the case of medicine, foodstuff, air travel and tobacco. Additionally, public healthcare tax will be increased and air transport will also be taxed.
In the upcoming weeks, the government will decide on the future of the price freeze on food and fuel, which expires on 1 July, taking into account the inflation. In this context, Márton Nagy noted that the Cabinet’s experience was that the price of these products had not peaked yet.
The minister said that local authorities and farmers’ organisations would not receive the subsidy anymore as it would be only available to families in the future. The majority of the small and medium-sized enterprises and municipalities will likely be able to meet the higher energy bills. He recalled that the regulations on reducing overheads were originally intended for families, but the government decided at the end of 2021 and beginning of 2022 to allow municipalities as well as small and medium-sized enterprises to join in because of the crisis – reported by Világgazdaság.
The contributions of airline companies and ground handling companies are calculated on the basis of the number of passengers they carry or serve (not in transit). According to the government decree, the rate of contribution depends on the passenger’s destination. In the case of Albania, Andorra, Bosnia and Herzegovina, Northern Macedonia, Kosovo, Liechtenstein, Moldova, Monaco and the EU, airlines have to pay EUR 10 (~HUF 3,900) after each person otherwise it is EUR 25 (~HUF 9,750) per passenger.
Airline companies are required to pay this amount on a monthly basis. This is also expected to make air travel more expensive on the consumer side. A few days after the announcement, the Hungarian low-cost airline Wizz Air issued a statement saying that they would be compelled to increase their fares due to the excess profits tax.
The excess profits tax rate for pharmaceutical distributors, due from 1st July this year and in 2023, is based on the differences between the producer and consumer prices of the products they distribute. It is 20% in the case of medicine that comes with a producer price of less than EUR 26 (~HUF 10,000) and 28% when the producer price exceeds EUR 26 (~HUF 10,000).
As previously announced, excise duties on tobacco and alcohol will also rise, as will the public health tax – commonly known as the chip tax. There will be further changes in excise duties regarding electricity, heating oil, coal and LPG. As Pénzcentrum reports,
according to the Minister of Economic Development, Márton Nagy, the government will act if companies try to pass the burden on to the public.
Source: penzcentrum.hu, piacesprofit.hu, portfolio.hu, vilaggazdasag.hu