tax/VAT

Hungary rises in global retirement rankings: Top countries for a happy retirement

In a recent global survey, U.S. News and World Report ranked 89 countries based on where people after retirement can enjoy the most comfortable lifestyles. With nearly 17,000 responses, the study assessed affordability, tax climate, friendliness, desirability, climate, property rights, and healthcare quality. Switzerland took the top spot once again, while Hungary improved its ranking from 47th to 45th, standing mid-range globally and in the upper-middle among European countries.

Hungary’s position and regional comparison

While Hungary remains in the middle of the list, it holds a solid position among regional peers. Within Central and Eastern Europe, only Croatia and Poland ranked slightly higher, while neighbouring countries such as the Czech Republic, Slovakia, Slovenia, and the Baltic states (Latvia, Estonia, and Lithuania) ranked lower, Index reports. This suggests that Hungary provides a competitive retirement experience for those looking at countries in the region.

Affordability and quality of life

One of Hungary’s key advantages lies in its affordability, with living costs considerably lower than those in top-ranked countries. Retirees can find Hungary attractive for this reason, particularly when compared to nations like Switzerland, Portugal, and New Zealand, where the quality of life is excellent but also comes with a high price tag. Survey respondents indicate that while other countries may offer more luxurious retirement options, Hungary is a solid choice for enjoying a comfortable retirement at a reasonable cost.

Appeal to retirees considering Hungary

Hungary’s central location in Europe, cultural diversity, and relatively lower costs make it an appealing choice for both local and international retirees. Although the healthcare system does not match the sophistication of Switzerland, Hungary still offers essential healthcare services that meet basic needs. For retirees looking to explore Europe affordably, Hungary’s positioning makes it a convenient and enjoyable option.

Comparison with top-ranked countries

Switzerland’s attractiveness for retirees largely stems from its advanced healthcare and favourable tax system. New Zealand, ranking second, is becoming increasingly popular as a retirement destination due to its scenic landscapes, welcoming culture, and supportive healthcare services. While life quality is undoubtedly high in the top-ranked countries, living costs are also significantly higher compared to Hungary.

Hungary’s future in the retirement rankings

Hungary’s improved ranking reflects that it’s becoming a more attractive retirement destination, especially for those seeking a moderate cost of living and a pleasant environment. If Hungary focuses on advancing its healthcare system and living standards, it could appeal to even more international retirees. Like other Central and Eastern European countries, Hungary faces the challenge of remaining competitive in the region, offering an appealing lifestyle for retirees.

Summary

With two spots gained in the rankings, Hungary finds itself as a mid-tier but solid retirement choice globally. Lower living costs and a friendly environment make it an attractive option, especially within its region. Future enhancements in infrastructure and healthcare could further bolster its appeal, positioning Hungary as a more competitive choice in the international retirement landscape.

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Featured image: depositphotos.com

October 26, 2024

Addressing Budapest’s housing crisis: Proposal to restrict home purchases by non-EU nationals

Budapest real estate housing crisis in Budapest's real estate market

Budapest’s leaders are taking bold steps to tackle the housing crisis, proposing a two-year ban on property purchases by non-EEA nationals and pushing for tax reforms to boost long-term rentals.

Addressing the housing crisis in Budapest

Világgazdaság reports that Budapest’s municipal leadership is set to propose a new housing policy aimed at addressing the housing crisis, with a vote expected next Wednesday. Ambrus Kiss, Director General of the Mayor’s Office, outlined key points of the plan during a background meeting. While the capital’s leadership supports the government’s efforts to tackle the housing crisis, they argue that the current measures are insufficient and require additional action. Gergely Karácsony, the city’s mayor, is presenting a ten-point programme seeking government support, which includes the regulation of short-term rentals like Airbnb.

real estate Hungary Budapest — Photo: Daily News Hungary ©

Supporting the rental market

The city is pushing for the government to expedite the implementation of these regulations and introduce tax reforms aimed at encouraging long-term housing. Proposed changes include increasing the tax burden on short-term rentals while reducing taxes for long-term rentals. Specifically, they suggest halving the tourism tax for rentals of more than one year and exempting income tax for housing rented out for more than three years. These measures are designed to motivate homeowners to place their properties on the rental market and alleviate the housing crisis.

Will non-EU nationals be banned from buying a house in Budapest?

Ambrus Kiss has proposed a significant measure to alleviate Budapest’s housing crisis, suggesting a two-year moratorium on property purchases by non-EEA nationals in the capital. This restriction would primarily affect buyers from outside the European Economic Area, including Chinese, Russian, and Arab nationals. The aim is to curb the trend of foreign investors purchasing apartments as assets, which often remain vacant, exacerbating the housing shortage. Kiss emphasised that similar regulations exist in other countries and are not considered discriminatory, highlighting the need to prioritise homes for residents over investments.

Budapest rent prices property prices exceeded property in hungary — Photo: depositphotos.com

Further initiatives

Additionally, the city is urging the government to remove the requirement for parking spaces in new housing developments, arguing that this regulation hinders the adaptive reuse of buildings. This change would enable greater flexibility in repurposing spaces such as former schools into residential units, potentially increasing the housing supply and addressing the ongoing housing crisis in Budapest.

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October 25, 2024

Minister talks about the Hungarian economy’s future: 3-4% GDP growth, SME program, strict rules for Airbnb, rentals

Hungarian minister talks about the future of the Hungarian economy

Government measures in the coming years will be determined by the three pillars of the government’s new economic policy, National Economy Minister Márton Nagy said at the Portfolio Budapest Economic Forum 2024 conference on Thursday.

25k new homes per year

Nagy noted that the three pillars of the new policy, approved at a cabinet meeting earlier in the week, were ensuring affordable housing, boosting the purchasing power of working Hungarians, and supporting SMEs with the launch of the Demján Sándor programme.

Nagy said Hungary’s third-quarter GDP would underperform the market consensus, coming in around zero, and put full-year growth under 1.5pc. He added that growth could climb over 3pc in Q1 2025, then move in a 3-4pc range.

Nagy said construction of “at least 25,000” homes a year was a “realistic goal”, as were “affordable” home prices and rental rates. He stressed that home mortgage rates had to be brought under 5pc, adding that there was nothing to stop runaway “home inflation”.

He said the capital was in the midst of a “housing crisis” in which young people had to pay over 50pc or 60pc of their income for rent. He added that the government had to intervene because local councils had not resolved the issue.

Tax increase on Airbnb-type activity

He noted that regulation of short-term rentals had been in the hands of the metropolitan council and district councils, but no measures had been taken.

Nagy said the government planned to announce a two-year moratorium on licences for short-term rentals in the capital, while raising the tax on Airbnb-type activity by a factor of “four or five”.

The government also wants to ensure there are enough dormitory rooms, even though that should be the task of universities, he added.

He said raising the minimum wage to a monthly EUR 1,000 and the average wage to HUF 1 million by 2028 was achievable if wage increases could be based on economic growth.

Hungarian economy workers — Significant wage rise for everybody. Photo: MTI

Nagy said the details of a credit scheme for young blue-collar workers were being drafted. He added that the interest-free credit would be capped at HUF 4m.

He said the Demjan Sandor Programme aimed to double the revenue or balance sheets of SMEs. He added that an important goal was doubling the share of Hungarian-owned SMEs in exports, while upgrading their digital accessibility and easing their access to credit.

Orbán cabinet drafting 2025 budget with ‘improved outlooks’

The government is drafting the 2025 budget with “improved outlooks”, Finance Minister Mihály Varga said at the Portfolio Budapest Economic Forum 2024 conference on Thursday. Varga said the government assumed GDP growth of 3.4pc, a 4.3pc increase in consumption and 5-5.5pc higher investment volume in 2025. He added that there were no plans to introduce new taxes, noting that announcements had already been made on phasing out windfall profit taxes on airlines, pharmaceutical companies and telcos. The government calculates with gross wage growth of 8.6pc next year, while it sees retail sales climbing 4-4.5pc.

Varga said the improving primary fiscal balance would be an important condition, adding that interest expenditures would fall in 2025, from 4.9pc to 3.8pc of GDP. The government aims to bring the general government deficit under 3pc of GDP in the coming years and targets a 4.5pc gap in 2024, 3.7pc in 2025 and 2.9pc in 2026, he added. Touching on debt management, he said the aim was to keep 50pc of state debt with institutional investors and raise the share with retail investors to 25pc, while adopting a 25pc threshold for external exposure. He added that the share of debt with retail investors stood at 21pc at present, while the share of FX debt had fallen under 29pc from 53pc in 2010.

Growing household savings point to an increase in consumption, investments and borrowing in the coming years, he said. He added that consumption, climbing on the back of real wage growth, would be an engine of growth in 2025. He added that the launch of big projects would bring investments out of negative territory. Varga said a smaller deficit would support growth, as well as targeted economic and labour market development programmes.

Economic success requires confidence, cooperation

There can be no economic success without confidence and cooperation, Finance Minister Mihaly Vara said at an awards ceremony at the Vigado in Budapest late Wednesday. Varga said confidence and cooperation had allowed Hungary’s economy to triple in size, at current prices, and grow 42pc, in real terms, since 2010. He added that 1 million new jobs had been created, while wages, adjusted for inflation, had climbed by more than 50pc.

Varga acknowledged the unfavourable external environment and said Hungary’s economy could grow 1-1.5pc this year. Next year, the European Commission also expects Hungary’s GDP growth to reach 3-3.5pc, he added. Consultancy EY Magyarorszag presented its EY Entrepreneur Of The Year award to Eva Hegedus, the co-founder and chairman-CEO of Granit Bank. She will represent Hungary at the World Entrepreneur Of The Year awards in Monaco in 2025.

EY Magyarország CEO Tamás Vékási said the awards acknowledged entrepreneurs who worked not only for their own success, but for the future of the economy and society, too.

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October 17, 2024

Budapest Mayor Karácsony urges Orbán to address housing crisis as rent prices soar – UPDATE

There is a housing crisis in Hungary, but especially in Budapest, with rents skyrocketing. But to solve this, we need two parties: the Orbán Government and the Budapest Mayor, who is part of the opposition.

Home rental rates in Hungary rise 9.6pc in September

Home rental rates in Hungary rose 9.6pc year-on-year in September, data compiled by the Central Statistics Office (KSH) from listings site Ingatlan.com show.

Rental rates in the capital increased 9.9pc.

In a month-on-month comparison, home rental rates edged down 0.1pc for the whole country and inched up 0.4pc in Budapest.

The monthly rental rate for a flat in Budapest’s District XIII and II, where the most rentals were listed, ranged between HUF 250,000 and HUF 350,000. The average rental rate was HUF 230,000 in Debrecen, HUF 150,000 in Pecs and HUF 160,000 in Szeged.

Karácsony and the government sees housing crisis

The Prime Minister’s recent statements suggest that the government understands that the housing situation, mainly affecting Budapest, “is unsustainable,” Gergely Karácsony, the mayor of Budapest, said on Monday.

The mayor said the housing crisis was an acute challenge in a letter to the prime minister. In a Facebook post, Karacsony noted that housing price and rent increases have now outstripped growth in household incomes.

He said Budapest had proposals and specific schemes at the ready, worked out in cooperation with the staff of the European Commission and a government body, to ensure the provision of affordable rental accommodation and to convert underused publicly owned buildings into housing, which he called the biggest housing scheme of the past decades.

He added that the 20 billion forint program would be implemented once the government “finally publishes” the related tenders so that Budapest can access related EU funding.

“I am ready to negotiate … to solve the housing crisis in Budapest,” Karácsony said.

Govt could remove obstacles to using voluntary pension savings for home purchase, renovation

Related news is that Hungary’s government has drafted a measure allowing Hungarians to use savings in voluntary pension funds for home purchases or renovations, tax-free, during the 2025 calendar year.

Social consultations on the measure will start on Monday, the National Economy Ministry said on Monday.

Over 1 million Hungarians are members of voluntary pension funds. On average, they have more than HUF 2m savings per member.

Read also: Hungarian housing market: Buyer demand reaches 2-year high

UPDATE

Fidesz councillor: Budapest suffering from housing crisis

Budapest is suffering from a housing crisis and the mayor of Budapest bears responsibility for it, Alexandra Szentkirályi, Fidesz’s group leader in the Budapest Assembly, said on Facebook on Tuesday.

In his manifesto five years ago, Gergely Karacsony promised to build subsidised housing and student dormitories, “and he had a series of other fake plans that came to nothing,” Szentkirályi said. The “thousands of billions” spent in the city, she added, had yielded “zero affordable rentals or dorms”, and the municipality’s housing agency had only managed to rent out three flats.

“Karácsony and his team are trying to sweep their total housing failure under the carpet, but they are the ones leading this city. Naturally, they are expecting solutions from the government, and now that the government has had enough of their inactivity, City Hall has started to panic,” she said.

October 15, 2024

Hungarian-Serbian Joint Economic Commission meets in Budapest

The Hungarian-Serbian Joint Economic Commission convened in Budapest on Tuesday.

Hungarian-Serbian Joint Economic Commission

After the meeting, at a press conference with Serbian Minister of Internal and Foreign Trade, Tomislav Momirovic, Minister of Foreign Affairs and Trade Péter Szijjártó, said cooperation between the two countries had benefitted both in terms of ensuring energy supply.

He noted that gas deliveries to Hungary via Serbia had reached 5.6bn cubic meters this year, while Hungary was storing 160m cubic meters of gas for Serbia.

He welcomed establishing a joint gas trading company that had become a big regional player and said a Hungarian-Serbian-Slovenian electricity bourse would launch by year-end.

Szijjártó said construction of a 310km crude pipeline from Serbia’s border to Hungary’s Danube Refinery would cost around half a billion euros. He added that construction could start next year and finish in three to three-and-a-half years.

He said a decision had been made on the site for an interconnector between the two countries’ electricity grids, which will be completed by 2028.

He said bilateral trade between Hungary and Serbia stands at around EUR 5bn, adding that headcount at border crossings had been raised to ease trade of goods.

Szijjártó touched on upgrading the Budapest-Belgrade rail line. Szijjártó said 150km of track on the southern stretch in Hungary had been laid, and the entire section would be completed by 2026.

He said state-owned energy group MVM would contribute to constructing a power plant to supply Serbia’s national stadium, which will be built in Belgrade.

Fielding questions at the press conference, Szijjártó said Hungary was unaffected by the expected end to transit deliveries of Russian gas via Ukraine. He explained that Hungary now gets most of its gas through the TurkStream pipeline.

Addressing a Hungarian-Serbian business forum later on Tuesday, Szijjártó said both countries advocated connectivity instead of economic blocs. “Serbians are grounded in common sense, they are not restricted by ideological commitments,” he added.

He said that representatives from 118 Hungarian and 43 Serbian companies participated in the forum.

Hungary, Serbia sign agreement modifying double taxation avoidance treaty

Hungary and Serbia signed an agreement modifying their double taxation avoidance treaty in Budapest on Tuesday, the Finance Ministry said.

The agreement was signed by Norbert Izer, the state secretary for tax affairs, and József Kerekes, the state secretary at Serbia’s Finance Ministry.

Izer said the agreement, signed after a Hungarian-Serbian Joint Economic Commission meeting, was “another step” toward closer economic ties.

October 8, 2024

Hungarian economy minister highlights need to bolster SMEs

National Economy Minister Márton Nagy stressed the need to strengthen Hungarian-owned SMEs at an event organised by the Hungarian Chamber of Commerce and Industry (MKIK) on Monday, his ministry told MTI.

Hungarian economy minister talks about strengthening Hungarian-owned SMEs

In a presentation, National Economy Minster Márton Nagy said the value of cooperation and partnership had appreciated amid the crises faced by the global economy, adding that the MKIK was an important partner of the government that could signal businesses’ needs.

A strong business sector is a prerequisite for a strong economy and convergence, which is why every effort must be made to boost the competitiveness of SMEs, he said.

Acknowledging the impact of the war in Ukraine and weak external demand because of the faltering Germany economy, he said there was a need to be “more resilient and more creative” and called for a new economic policy. That policy requires thinking that is “4-5 steps ahead” and “targeted use of resources” concentrated on Hungarian-owned SMEs, he added.

He said a new state secretariat would be established soon within the National Economy Ministry dedicated to SMEs. He added that domestic demand, the source of much SME revenue, needed to be boosted, too.

The government will establish favourable financing conditions in the framework of a targeted action plan, while continuing to ensure interest support through the Széchenyi Card Programme, and launch a new capital scheme, the economy minister said.

SMEs also need a targeted programme offering investment subsidies based on one-off government decisions, like the scheme for big companies, he added.

The action plan being drafted places stress on SME digitalisation, without which staying competitive is “unimaginable”, he said. Every business needs their own website and an email, the economy minister added.

He said local businesses in commerce needed to start competing with foreign webshops as those were taking away a big chunk of Hungarians’ consumption.

Addressing wage policy, he said the minimum wage needed to be raised to 50pc of the average wage gradually. He added that businesses could manage that increase and it wouldn’t put SMEs at risk.

The Hungarian economy minister said the government was working on a package of measures targeting families with children, including bigger tax preferences and a new home purchase programme. He added that Hungarians needed to be given the option of saving a certain amount every year, tax free, to use for home purchases for themselves or their children.

He put next year’s GDP growth at 3-5pc and said the contribution of locally-owned SMEs to that expansion needed to increase.

Read also:

September 10, 2024

Viktor Orbán announces doubling of tax benefits for families with children!

family tax benefits Hungary's population families

In a recent Facebook post, Hungarian Prime Minister Viktor Orbán announced that the tax benefits for families with children will be doubled in 2025. The announcement was part of Orbán’s speech at the Tusványos Summer Free University and Student Camp, where he emphasised the need for a strong and flexible Hungarian society. According to Orbán, reversing the country’s demographic decline, which has stagnated despite initial success, requires renewed efforts.

As part of a “peace budget,” the government plans to double the child tax benefits and extend these benefits to Hungarians living abroad, Portfolio reports. Orbán also stressed the importance of preserving the rural village system and maintaining a work-based society, avoiding the creation of megacities.

Who is eligible for family tax benefits?

Individuals entitled to family allowances.
Parents who share custody of their child based on a court decision, agreement, or joint declaration.
Spouses living in the same household as the family allowance recipient but not entitled to the allowance themselves.
Pregnant women and their spouses living in the same household.
Children entitled to family allowances on their own behalf and individuals receiving disability benefits.
Individuals eligible for family allowances, disability benefits, or similar benefits under the laws of any foreign country, provided they meet other statutory conditions.

Duration of family tax benefits

The family tax benefit can be claimed from the 91st day of pregnancy, requiring a medical certificate. It continues until the child reaches 16 years of age, or longer if the child is enrolled in a full-time educational institution (such as high school or vocational school). The benefit ends when the child graduates from high school. However, if there are younger siblings who are eligible, the older child can still be considered for the benefit, albeit at a reduced rate.

Applicable incomes for family tax benefits

Family tax benefits can be claimed on income that forms part of the consolidated tax base, including:

Income from independent activities, such as private businesses, agricultural production, or rental income.
Income from dependent activities, such as wages and taxable social security benefits, including child care fees.

This comprehensive increase in family tax benefits is aimed at supporting Hungarian families and encouraging population growth.

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Featured image: depositphotos.com

July 28, 2024

Hungarian government launches ruthless tax panacea to save the yearly budget

forint bank card coin money bond finance interest rate freeze Hungarian government orbán

The Hungarian government has unveiled an adjustment package to address budget deficits. Significantly increased transaction taxes are expected to raise substantial revenue. Who will pay the price of these changes?

Tax panacea to save budget deficit

As Portfolio reports, the Hungarian government’s recent announcement of an adjustment package was inevitable due to budget deficits for both this year and next. A key element of this package is a significant increase in the transaction tax, anticipated to raise almost HUF 100 billion (EUR 254 million) this year and nearly HUF 250 billion (EUR 635 million) next year. While banks collect this tax, the exact distribution of the burden remains unclear.

Despite banks having paid the transaction tax for over a decade, the pass-through mechanism means corporate customers predominantly shoulder the cost, with retail customers contributing less than a quarter of the total revenue. Though there have been occasional suggestions to modify the levy, the Hungarian government remains reluctant to alter this lucrative source of revenue, which continues to generate hundreds of billions annually.

The changes

From 1 August, transactions already subject to the transaction tax will face increased rates: the general levy will rise from 0.3% to 0.45%, with the cap per payment transaction doubling from HUF 10,000 (EUR 25.4) to HUF 20,000 (EUR 50.8). Cash withdrawals will see the tax increase from 0.6% to 0.9%.

Essentially, the normal transaction tax will increase by 50%, while larger transactions will see a 100% increase. Additionally, starting 1 October, transactions involving currency conversion will incur an extra levy, raising the tax from 0.3% to 0.9%, capped at HUF 20,000 (EUR 50.8). Physical currency exchange will also see its tax rate align with the general level of 0.45%.

What does the Hungarian government expect from this?

The Hungarian government anticipates that the general levy increase will generate HUF 85 billion (EUR 216 million) and the additional conversion levy HUF 7 billion (EUR 18 million) in 2024, with the latter expected to reach HUF 30 billion (EUR 76 million) in 2025. Initially projected to bring in HUF 348 billion (EUR 884 million) for 2024, the new measures are expected to boost total revenue to HUF 440 billion (EUR 1,117 million). For 2025, including the increased levies and assuming continued cash flow growth, transaction taxes could yield over HUF 600 billion (EUR 1,524 million).

Should customers fear extra fees?

Some may fear that the banks would try to pay this extra fee by passing it on to customers. However, the government does not allow fee increases to be passed on to residential customers and has banned any increase in fees or discounts in this area until the end of 2024. In addition, banks might pass this fee (or at least some percentage of it) to their corporate clients.

According to 24.hu‘s expectations, the Hungarian government’s announced measures are expected to impact Hungary’s largest listed companies significantly. For MOL, the surplus tax rate will increase from 1% to 2.8% of 2022 revenue. OTP anticipated a gross extra profit tax of HUF 13 billion (EUR 33 million) for 2024, which could have been reduced to HUF 6.5 billion (EUR 17 million) due to increased government bond holdings, but was set at HUF 10 billion (EUR 25 million). However, in 2025, OTP’s extra profit tax could rise to HUF 25 billion (EUR 63 million).

Further tax changes

As ATV reports, Minister of National Economy Márton Nagy announced at a press conference that there would be no air traffic tax next year. At another press conference where he presented proposals to boost the electric car market in Europe, Nagy revealed that starting January 2025, telecoms and pharmaceuticals will no longer have to pay the excess profit tax. However, he justified the continuation of the Hungarian government’s excess profit tax for banks.

Read also:

July 12, 2024

Hungarian extra tax concerning all air passengers to be abolished, tickets may be cheaper!

extra tax budapest airport Budapest-Antalya flight delayed 40 hours

The Hungarian state, as a financial and strategic investor, will be the one to decide on the development of Budapest’s Liszt Ferenc International Airport, the national economy minister said on Tuesday.

Passenger traffic at the airport could reach an annual 20 million by the end of the decade even according to conservative estimates if the developments are carried out, Marton Nagy told a press conference. The annual passengers number may exceed to 25 million by 2040.

Nagy said French airport operator Vinci, the state’s investment partner in the airport’s acquisition, was an “ideal partner”, as it operates more than 70 airports in over a dozen countries, and as an owner it was interested in ensuring that the airport is run as efficiently as possible.

World top airline Budapest Airport extra tax — Photo: FB/Budflyer

Government abolishes extra tax, builds high-speed railway, highway to the airport

The minister said the government was exploring its options for financing the infrastructure developments needed for expanding the airport, adding that planning had to begin as soon as possible so that a third terminal could open in 2032. The planning and implementation schedule will be ready in the autumn, he said. The financing, he added, would not be covered solely from the budget, with concession agreements also being an option, as the cost of railway and road developments could exceed 1 billion euros. The government will decide on the technical specifications concerning the two connections in the coming two months.

The idea of developing and reopening Terminal 1 is not a priority for Vinci because of the building’s limits. In the first phase, they will expand Terminal 2, airportal.hu wrote.

extra tax Orbán cabinet ready to introduce harmful fines for delaying airlines — Photo: FB/Budapest Airport

He also said there was a possibility of involving a Qatari investment fund as a third investor in the airport. This will be decided by the current owners, he said, adding that the new investor’s stake could be less than 10 percent.

Nagy said the airport’s 3.1 billion euro purchase price was realistic and in line with market expectations. In response to a question, the minister said the windfall profit extra tax on airlines will be phased out from January.

Concerning the several delays, Nagy said that HungaroControl will no longer be under the Ministry of Defence. From 1 August, it will operate under the Ministry for National Economy.

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July 10, 2024

Banks in Hungary reject government accusations about their excess profit

forint hungarian central bank minimum wage loans

The Hungarian Banking Association denied on Tuesday that the bank sector had enhanced profits during wartime, insisting it had been among those suffering the economic uncertainties caused by the war and had endured the burdens of various government measures “in a disciplined and cooperative manner”.

The unpredictability of a series of burdens and measures introduced by the government “has significantly restricted the lending capabilities of the Hungarian bank sector, its international competitiveness and role in stimulating the economy,” the statement added.

Measures announced in the official gazette Magyar Kozlony late on Monday, the so-called “defence contribution”, further advantage fintech providers that offer cross-border services, the statement said.

At the same time, the Hungarian banking sector is one of the government’s most important partners in implementing its economic policy, from managing the pandemic to family policy, SME financing, digitalisation and infrastructure development, “demonstrating its dedication on a daily basis”, it added.

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July 9, 2024

Has the Hungarian government entered an austerity spiral?

PM Orbán is in Kyiv, meets President Zelensky hungarian government Hungary's presidency

The Hungarian government has “entered a spiral of austerity “, the spokesman of the opposition Democratic Coalition (DK) said on Monday, in response to measures announced by the head of the Prime Minister’s Office.

The Hungarian government has announced “yet another austerity package”, Balázs Barkóczi told an online press conference, commenting on announcements in today’s government press briefing. He insisted that a new tax dubbed “defence contribution” was an old form of tax under a new name.

He said that the government was “pretending” to levy a tax on banks and multinational companies while knowing that they would pass that new burden on to clients — “as they always do”.

“Only the left wing can provide a way out of this situation, by increasing wages and pensions, pursuing a predictable economic policy, wiping out corruption and introducing the euro,” Barkóczi added.

Ruling Fidesz said in a statement in response that forces on the left disliked multinationals and banks “being made to pay” as they represented the interests of their foreign sponsors. “The pro-war left has been stuffed with foreign money for years. They represent the interests of their sponsors, not those of the Hungarian people,” said Fidesz.

Read also:

July 9, 2024

Multinationals in trouble: Hungarian government imposes new special tax, keeps excess profit tax

Last year, the Hungarian government promised to abolish the “excess profit tax” on banks, multinationals and energy companies in 2024. However, instead of doing so, it is now imposing a new excess profit tax on these companies. In addition to the transaction tax, the government is imposing extra charges on foreign exchange transactions.

Multinationals to have an even harder time in Hungary

During Monday morning’s Cabinet Briefing, Gergely Gulyás, the minister in charge of the Prime Minister’s Office, said that

a “defence contribution” will have to be paid to multinationals that made “excess profits” during the war.

The same applies to the banking sector and energy companies, Economx reports.

The government negotiated a reduction of the bank tax, but according to Gulyás, many financial institutions took advantage of a loophole in the purchase of government securities, with all banks that did not increase their total holdings of government securities having to pay the bank tax in full.

In effect, the measure means that the government will not eliminate the special taxes on multinationals, banks and energy companies. What is more, it will impose extra charges on foreign exchange transactions in addition to the transaction tax.

Budget deficit reaches HUF 2,656.4 billion at end-June

Hungary’s cash flow-based budget deficit reached HUF 2,656.4 billion (EUR 6.8 billion) at the end of June, the finance ministry said in a preliminary release of data on Monday.

The central budget had a 2,640.1 billion forint deficit at the end of the month and the social security funds were 161.9 billion in the red, but separate state funds were 145.6 billion forints in the black.

The budget deficit reached 107.8 billion forints for the month of June alone.

Interest expenditures, which included large payments on retail government securities, came to 2,009.5 billion forints in January-June, up 649.4 billion from the same period a year earlier, the ministry said.

Expenditures for European Union-funded programmes reached 945.7 billion forints, while transfers from Brussels came to 578.2 billion forints, the ministry said.

Read also:

Featured image: depositphotos.com

July 8, 2024

The government’s latest tax decision concers lots of people in Hungary

Hungary’s government is extending an interest rate freeze on retail loans until the end of 2024, Márton Nagy, the national economy minister, said in a statement on Thursday.

Nagy noted that the rate freeze was introduced in January 2022 and extended several times with a view to shielding households from the negative effects of the high-interest environment.

Over the past two and a half years, the measure has helped some 300,000 families with over 1,250 billion forints (EUR 3.16bn) in credit, Nagy said, adding that the freeze has saved them 266 billion forints so far.

Read also:

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June 21, 2024

Insider: Tax evasion case of Hungarian billionaire businessman swept under the rug by high ranking officials

György Gattyán Hungarian Playboy Hungary news

An investigator formerly employed at the National Tax and Customs Administration (NTCA) claims that individuals in high political circles helped to brush aside the tax evasion case against billionaire entrepreneur György Gattyán.

Former tax investigator Lajos Tiszolczi spoke to Partizán about the HUF 19.4 billion (EUR 49 million) tax evasion case against György Gattyán, one of the largest in the country. He asserted that the tax evasion case was closed due to the intervention of three politically influential individuals.

The background: tax evasion investigation

György Gattyán, founder of the adult camming website LiveJasmin and owner of Docler Holding, is one of Hungary’s richest individuals.

In 2012, his adult website came under the scrutiny of the NTCA, leading to a tax evasion investigation. According to Telex, LiveJasmin was operated by Lalib, a company registered on the island of Madeira. Lalib paid Gattyán a licence fee, with Gattyán’s company paying corporate tax in Hungary and VAT in Portugal.

Additionally, the intellectual property rights of the business were initially registered in Liechtenstein and then in Portugal, before being transferred to Hungary in 2009 in a so-called “royalty-free asset transfer”. This presumably led the NTCA to start monitoring the company’s finances.

A criminal investigation was officially launched in May 2012, initially focusing on the free transfer of know-how rights and the subsequent loss of value. On 12 September 2012, the headquarters of the Docler Group were searched, and documents were seized by NTCA officials.

In a surprising turn of events, the NTCA found that Gattyán’s company had not paid tax in accordance with domestic accounting standards but had, in fact, overpaid its tax by HUF 6.5 billion (EUR 16 million).

However, citing secret recordings, the NTCA claimed that Lalib was merely a shell company designed to give Gattyán a tax advantage. Officials argued that Portuguese VAT was 4 percentage points lower than in Hungary, and Lalib was structured to avoid tax payments in Hungary.

The investigation continued for years, involving the European Court of Justice at one point, and was only dropped in 2021.

György Gattyán tax evasion — György Gattyán. Photo: Instagram

Inside information: the case was covered up

.In an interview with Partizán, Lajos Tiszolczi, a former financial investigator, said he had worked on the case for years until it was suddenly dropped due to the intervention of three politically well-connected individuals, two of whom are widely known to the public. Tiszolczi stated that without their involvement, the NTCA would have continued the investigation.

By 2021, the NTCA was preparing to press charges in the tax evasion allegation case. However, contrary to established protocol and without prior warning, the 2012 tax evasion case involving HUF 19.4 billion was suddenly merged with a smaller case from 2015, and the NTCA closed the investigation into both cases shortly afterwards, citing a lack of criminality.

Earlier that year, several senior figures were removed from the agency, including the president and the director of criminal investigation. According to Tiszolczi, a system of self-censorship developed soon after. For instance, it became common practice for officials to informally ask whether they should proceed with investigations when influential figures were involved in tax evasion cases.

After the personnel changes, Tiszolczi was required to submit all his reports and was asked if there was anything else he had not yet documented. “I wrote a report, it was not lengthy, and I listed three names that could be linked to the Gattyán case, if applicable, and this was also submitted. The strange thing was that when I was questioned afterwards, I didn’t have to write anything down, I just had to report or answer the questions verbally. […] I believe their help was needed to get the case closed.”

According to Tiszolczi, after the investigation of the tax evasion case was taken out of his hands, he was not given any meaningful tasks and felt that administrative difficulties were being used to persuade him to leave voluntarily. When he was offered a job at the Integrity Authority, he resigned. However, the job offer was then withdrawn without explanation, and in a phone conversation, he was told: “We received a tip that you are a national security risk, so we are not hiring you.”

The NTCA responds to the allegations

Telex asked the NTCA about the claims made by their former employee. The office responded: “[t]he National Tax and Customs Administration (NTCA) always acts in accordance with the applicable legislation. Any claim to the contrary is most emphatically rejected. In the case mentioned in the video published today on Partizán’s YouTube channel, the NTCA exhausted all legal means, but a decision in favour of the defendant was reached in both domestic and international legal forums.”

The NTCA added that it “will take appropriate legal action against any allegation that could undermine public confidence in the NTCA.”

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June 18, 2024

Orbán government continues program reshaping Hungary’s property sector

Spontaneous euroisation Budapest rent prices property market prices exceeded property in hungary renting in Hungary rental

The government is expanding VAT cuts until the end of 2026, the finance minister said on Facebook on Saturday.

VAT will remain 5 percent on newly built apartments smaller than 150sqm and houses smaller than 300sqm, in a move that will support families and the construction sector, Mihály Varga said.

Homes purchased after 2026 will be eligible for the same discount up until 2030 if their building permits had been obtained by 2026, he added. The step is expected to leave 200 billion forints (EUR 513.3m) with taxpayers, he said.

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May 4, 2024

Why are petrol prices soaring in Hungary? Unveiling the truth behind the high costs!

The Hungarian government’s desired reduction in petrol prices, ranging from HUF 40 to 60 per (EUR 0.10 to 0.15) litre presents a considerable challenge. While measures such as shorter opening hours and layoffs may help mitigate costs, achieving such substantial reductions solely through these methods appears unlikely.

According to vezess.hu, the government is criticised for overtaxing fuel and then shifting blame onto other factors when attempting to address high prices. László Gépész from the Association of Independent Petrol Stations likens this approach to oversalting soup and blaming carrots for not making it less salty.

Economy Minister Márton Nagy recently met with industry leaders, urging them to lower fuel prices to regional averages. However, questions remain regarding how this will impact consumers at the pumps.

Fuel price in Hungary — Photo: depositphotos.com

The Hungarian Petroleum Association’s reaction

Ottó Grád, the secretary general of the Hungarian Petroleum Association (MÁSZ), expressed reservations about reducing fuel prices despite requests to do so. He highlighted that the current prices were adjusted earlier in the year due to changes in tax elements. These changes included an increase in excise duty and an additional 3% retail tax for petrol station operators. Grád emphasised that there is only a minimal profit margin in fuel retailing, contrary to claims of extra profits. As such, any reduction in prices may impact service quality due to the already narrow profit margins.

Grád highlights the challenges faced by petrol stations in implementing price reductions. He emphasises that even a slight price reduction necessitates significant cost-saving measures, such as reducing service quality through shorter opening hours and layoffs to lower labour and electricity expenses. However, these measures result in diminished service standards, as exemplified by early closure times. The secretary general advocates for increasing wages rather than laying off workers to maintain service quality. Despite these efforts, achieving the desired fuel price reduction of HUF 40 to 60 per litre remains unfeasible.

The general secretary of MÁSZ asserts that the petrol station operators are unaffected by factors such as the number of employees, raw material prices, exchange rates, taxes and energy prices. He emphasised the development of a world-class network of service stations in Hungary over the past decades. However, he expressed concern that the high quality of service is now jeopardised due to current challenges.

Other reactions

There is a perception of discord within the government regarding fuel prices, with Finance Minister Mihály Varga suggesting that Hungarian fuel prices are relatively average in Europe when taxes are excluded. However, another government member implies that not everyone shares this view. The vice president of the Association of Independent Petrol Stations highlighted that a significant portion of fuel prices are allocated to taxes, indicating a desire for motorists to understand where reductions could occur. Despite this, achieving cheaper fuel remains a priority for car owners.

Hungary’s taxes are not to blame for high fuel prices, the finance minister said on Monday, adding that taxes on fuels were among the lowest in the European Union. Mihály Varga said on Facebook that the price of regular petrol contained 46 percent tax in Hungary, while in Austria that ratio was 52 percent, in Germany 55 percent, and in Slovakia and Czechia 49 percent. Citing figures from the European Commission, Varga said the highest taxes on fuels were levied in Finland, Greece, Ireland, Malta and Italy, with a uniform 56 percent.

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April 24, 2024

Expert: Quality of food in Hungarian shops often worse than in Western Europe

According to an expert, the quality of food sold in Hungarian shops is often worse than those sold in Western Europe. The best way for businesses to cut prices is to produce lower-quality products or reduce package sizes: which is what’s happening in Hungary.

Average price level of food and beverages in Hungary lower than EU average

cba shopping food hungary — A CBA store in Hungary. Photo: MTI/Balogh Zoltán

Zombor Berezvai, an assistant professor at Corvinus University of Budapest, told Agrárszektor that “we are not doing well in international comparison,” adding that the Hungarian food industry is generally less efficient and productive than its regional competitors. However, he also added that in general, it is misleading to say that food is more expensive here than elsewhere.

This is supported by Eurostat data, which clearly shows that the average price level of food and non-alcoholic beverages in Hungary is still significantly below the EU average, namely 90% of it. The article recalls that the Hungarian National Bank (Magyar Nemzeti Bank, MNB) has repeatedly pointed out that the efficiency of the Hungarian food industry lags behind the productivity of major European countries, which undoubtedly makes products produced in Hungary more expensive.

Everything is more expensive in Hungary than elsewhere – or is it?

Vegetable prices in a Hungrian Spar — Photo: Daily News Hungary – Vivien Rima ©

Moreover, the Hungarian food industry faces a higher interest rate environment if it wants to invest or develop, Agrárszektor explains. This is exacerbated by high VAT levels and the volatility of the forint against the euro and the dollar. In many cases, companies react to the latter by expecting a higher exchange rate because they do not want to lose profit due to unpredictable exchange rate movements.

Indeed, this does not only affect imported products but also domestic products, which adjust their prices to competing imports, due to competitor-oriented pricing. These would justify products costing more at home than abroad. However, even if firms produce more expensive products, and even if VAT is higher in Hungary and the exchange rate is less favourable, if they reflect this in their prices, it will significantly reduce demand.

Lower-quality products, smaller packaging

“This is where demand-driven pricing, consumers’ purchasing power and willingness to pay enter the picture,” the expert said. According to him, this may be why prices for many products do not end up being higher in the country. However, the only way for companies to reduce prices is to produce lower-quality products or reduce package sizes.

“I think the former is the reason why the quality of many products in Central and Eastern Europe – and therefore in Hungary – is lower than in Western Europe, and why the size of packages is often smaller and smaller. That’s just how things add up,” concluded Zombor Berezvai.

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April 3, 2024

Does Budapest not pay taxes to the government?

Financial reports of the past five years “clearly disprove” claims by the mayor of Budapest that the city was not paying taxes because “the government is bleeding out the city”, the finance minister said on Thursday.

Varga posted a chart on Facebook showing 1,107 billion forints (EUR 2.8bn) in business tax payments and central budget allocations to the municipal budget in 2019-2023 as against 160 billion paid by the city to state coffers in solidarity tax during that period.

“The mayor has not paid taxes since last June … Budapest has rejected to pay 46 billion forints in solidarity tax until March,” Varga said in his post.

Out of that amount, 28 billion forints had already been collected by the Treasury while the mayor was seeking to postpone the payment of the remaining 18 billion, the minister said.

The solidarity tax is a contribution by wealthier local councils to support poorer localities, Varga said. The city’s leftist leadership would be harming them, had the government not supplemented their funding, he added.

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March 28, 2024