tax/VAT

Cheaper fuel prices will return in Hungary? – UPDATED

MOL fuel station Hungary oil

Lawmakers of opposition Jobbik on Wednesday submitted a proposal to lower taxes on fuel, in light of the government’s announcement of scrapping the price caps on fuel, deputy party leader Róbert Dudás said.

Dudás called for the government to start talks with the European Commission on reducing the VAT and excise tax on fuel prices. The government should at the same time stop counting on “extra profits” from taxing high fuel prices, he told an online press conference. He called for restoring fuel supply first at the 500-600 small pumps in the countryside, arguing that “the everyday life of locals depend on the operation of these pumps that are facing closure”.

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Read alsoWill Hungary’s forint get stronger or weaker due to the government’s latest decision?

Other opposition demands protection for Hungarians after govt scrapping fuel price caps

Green opposition LMP said that scrapping the price caps is only “a partial remedy” to problems emerging in the transport sector. “The sudden increase in fuel prices will put a burden on many families,” Erzsébet Schmuck, the co-leader of the party told a press conference, said. LMP urges “a green reform”, calling on the government to support renewable energy while phasing out fossil fuels, she said.

Bence Tordai, the deputy group leader of Párbeszéd, told a press conference that by scrapping the fuel price cap, “the government is starting to admit that they are incompetent as well as sticky-handed.” He called for the support of community transport and people rather than fossil fuels. He proposed introducing a utility voucher to compensate families for the price increases and introducing a four-day work week in a bid to reduce energy consumption.

The Democratic Coalition (DK) slammed the decision as “another government austerity measure”. László Varju, the party’s deputy leader, said fuel would now cost “twice to two-and-a-half times as much” as it had under the Socialist government of Ferenc Gyurcsány, DK’s leader, between 2004 and 2009. “At least that’s what it’ll cost when there’s fuel again,” Varju said, arguing that Hungary was currently the only European country “where it’s impossible to refuel”. He accused the government of “lying”, saying there was no oil sanction in effect that applied to Hungary.

Ruling Fidesz said the leftist opposition “continues to support the sanctions”. In a statement, they insisted that the leftist parties “in return for dollars rolling in try to prove that the sanctions are working, while the fuel price caps had to be scrapped because of those very sanctions.”

MOL fuel station lukoil
Read alsoHere are the causes of the Hungarian fuel crisis

Hungary gas consumption down by 41 pc yr/yr in October

Gas consumption in Hungary fell by an annual 41 percent to 5.8 TWh in October, a monthly report by the Hungarian Energy and Public Utilities Regulatory Office (HEA) shows. HEA said about half of the decline was due to milder temperatures. However, adjusting for the better weather, consumption still fell by 23 percent. Gas stores were topped up with 8.2 TWh in October, bringing the total to 58 TWh.

Explanation after Hungary’s veto: aid to Ukraine is not fair – UPDATE

Finance Minister Mihály Varga

Certain European Union countries’ attempt to link the approval of Hungary’s recovery fund to “completely unrelated” issues such as the global minimum corporate tax or a 18 billion euro loan taken out to aid Ukraine is “not fair” and “would create a dangerous precedent”, Finance Minister Mihály Varga said in Brussels on Tuesday.

Varga told a press conference after a meeting of EU finance and economy ministers (ECOFIN) that the European Commission’s recent positive assessment of Hungary’s recovery plan “after a year and a half” was a “significant step forward”. All member states support the plan’s content, and so it could be officially approved before the end of the year, he said.

At the same time, Varga regretted that the EC has maintained its proposal to suspend disbursement of funds for three operative programmes, despite the government’s fulfillment of 17 requirements until the November deadline.

Since this is the first time the rule of law conditionality is being used, several member states have said that the EC “should remain fair, objective and proportionate” and “base its standpoint on facts”, he said.

“Several member states have called for an objective evaluation, considering Hungary’s steps taken after November 19th; France and Germany, among others, think the Commission’s evaluation is somewhat disproportionate,”

Varga said. He expressed hope that the EC would conclude the procedure with a more “objective” assessment.

Regarding plans that EU member states would take out a joint loan of 18 billion euros to aid Ukraine, Varga said Hungary will not give its consent to that plan. “We have had bad experiences with joint loans – the one taken out during the coronavirus pandemic did not help Hungary to access the resources,” he said.

Hungary is ready to help Ukraine further but will only disburse its own resources on the basis of a bilateral agreement with concrete goals set in advance, he said, adding that Hungary already had the resources for that aid in its central budget at hand.

Meanwhile, Hungary has received over 1 million Ukrainian refugees and spent 31 billion forints (EUR 75.3m) on support for the country, he said.

Touching on the issue of the global minimum corporate tax, Varga noted that at 9 percent, Hungary’s tax rate was one of the lowest. The international attempt to introduce a global minimum tax would raise that to 15 percent, he said. Such a step would cost jobs and harm the country’s competitiveness, and so Hungary does not support it, he said.

Czech presidency – reaction

Commenting on the issue, the finance minister of the Czech Republic, holder of the current EU presidency, said Hungary’s recovery plan would be “handled as part of a package also including the 18 billion euro aid to Ukraine and the global minimum corporate tax”. “If there is no agreement on one issue, then there is none on the other ones, either,” Zbynek Stanjura told reporters after the ECOFIN meeting.

Approving the package will also depend on what sort of measures Hungary would implement in the interest of protecting the EU budget, he said, adding that the Czech presidency had asked the European Commission to prepare a fresh report evaluating “the progress” the Hungarian government had made in legislation in connection with the rule of law situation addressed by the commission.

“The Czech presidency is fully committed to finding a compromise. Once that is achieved, it will be a mere technicality to reach an agreement on the entire package by the end of the year,”

Stanjura said.

European Commission Vice-President Valdis Dombrovskis said Ukraine is fighting serious financing shortages, and is counting on the first instalment of the aid in January already. While they couldn’t reach an agreement at the meeting, the work will continue in the coming days, he said.

“Ukraine is at war, we can’t allow one member state to derail or delay the aid,” he said.

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Read alsoBreaking news: Hungary blocks EU aid to Ukraine amid Russia war

LMP: government neglecting people in homes for elderly, disabled

tax deductions

The government is failing to “guarantee the security of people having to rely on welfare services” and those living in homes for the elderly, the disabled and other similar institutions, the opposition LMP party said on Tuesday.

Krisztina Hohn, LMP‘s welfare spokesperson, told a press conference that people living in communal facilities “cannot be certain that they will continue to have a home” as those facilities may not be able to pay their utility bills. Rather than helping those people, the government has “put a decree in their stockings” under which such facilities are no longer required to ensure minimum conditions for their dwellers, she added.

All necessary welfare services could be financed “if Prime Minister Viktor Orbán at last consented to the necessity of a global minimum tax,” Hohn said, proposing that

the corporate tax should have two brackets, with companies earning less than 500 million forints (EUR 1.2m) in annual revenues continuing to pay the current 9 percent, while firms that earn more should pay 25 percent.

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Read alsoBreaking news: Hungarian parliament rejects EU directive on global minimum tax

 

Important tax modifications accepted by the parliament

Hungarian parliament lawmaking government

Lawmakers voted on Tuesday to extend the preferential VAT rate on home construction and exempt advertising companies from a sectoral tax.

MPs approved the legislation extending the temporary 5 percent home construction VAT rate by two years until the end of 2024 with a vote of 130 for, 32 against and 21 abstentions. The law extends an exemption from payment of the advertising tax until the end of 2023. It also introduces progressive rates for the local business tax (HIPA) for small companies and exempts transfers of student loans from the State Treasury from the financial transactions duty.

Michael O'Leary ryanair
Read also Ryanair calls modified Hungarian departure tax idiotic

Ryanair calls modified Hungarian departure tax idiotic

Michael O'Leary ryanair

Ryanair called on the Hungarian government to apologise to its citizens and visitors for its failed attempt to impose an ‘excess’ profits tax on airline handlers, which was always a bogus and dishonest tax on consumers air travel.

The Hungarian government now proposes to replace this non-existent ‘excess’ profits tax, with an ‘environmental’ passenger tax. Any such tax will make air access to/from Hungary more expensive and uncompetitive, compared to flights to neighbouring countries, such as Romania, Serbia, Slovakia, Croatia, and Austria. Inbound visitors to the Balkans will now avoid Hungary, and this bogus Govt. tax, which makes air travel to/from Hungary uncompetitive and more expensive, at the expense of Hungarian citizens and visitors.

At a time when other EU countries are scrapping air travel taxes and lowering airport fees, Ryanair calls on the Hungarian government to follow this example, and scrap this idiotic and damaging passenger tax, ryanair.com wrote.

Wizz Air Airbus A321neo
Read alsoCheaper tickets? Departure tax change for airlines in Hungary

Ryanair’s CEO, Michael O’Leary said:

“We welcome the Hungarian Govt.’s decision to replace its dishonest ‘excess’ profits tax with an environmental airfare tax on passengers, which at least proves that the intention of the Hungarian Govt. was always to tax passengers, and not non-existent airline profits. Having shown that their original ‘excess’ profits tax was dishonest (when in reality it was a passenger tax), Ryanair again calls on the Hungarian Govt. to scrap this stupid tax, which makes air travel to/from Hungary more expensive, and less competitive than it is to/from neighbouring Romania, Serbia, Croatia, Austria, or Slovakia.

At a time when Hungary and its tourism industry need to recover from the damage caused by Covid, Hungarian citizens and visitors need lower airfares, and more flights, not fewer flights and higher Govt. taxes. We hope the Hungarian Govt. will now accept the stupidity of this absurd tax, scrap it, and make Hungary a low-cost, competitive air travel and tourism destination once again, for the benefit of Hungarian citizens, their families, and visitors.”

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Read alsoNew Hungarian regional flights connecting Transylvania and Balaton

Ryanair calls on the Hungarian Govt. to apologise to its citizens and visitors

ryanair

Ryanair today called on the Hungarian Govt. to apologise to its citizens and visitors for its failed attempt to impose an ‘excess’ profits tax on airline handlers, which was always a bogus and dishonest tax on consumers air travel, pres release said.

The airline’s announcement said, the Hungarian Govt. now proposes to replace this non-existent ‘excess’ profits tax, with an ‘environmental’ passenger tax. Any such tax will make air access to/from Hungary more expensive and uncompetitive, compared to flights to neighbouring countries, such as Romania, Serbia, Slovakia, Croatia, and Austria. Inbound visitors to the Balkans will now avoid Hungary, and this bogus Govt. tax, which makes air travel to/from Hungary uncompetitive and more expensive, at the expense of Hungarian citizens and visitors.

At a time when other EU countries are scrapping air travel taxes and lowering airport fees, Ryanair calls on the Hungarian Govt. to follow this example, and scrap this idiotic and damaging passenger tax, says press release.

As we wrote earlier, the Hungarian government plans to introduce a progressive taxation system for airlines, details HERE.

Ryanair’s CEO, Michael O’Leary said:

“We welcome the Hungarian Govt.’s decision to replace its dishonest ‘excess’ profits tax with an environmental airfare tax on passengers, which at least proves that the intention of the Hungarian Govt. was always to tax passengers, and not non-existent airline profits. Having shown that their original ‘excess’ profits tax was dishonest (when in reality it was a passenger tax), Ryanair again calls on the Hungarian Govt. to scrap this stupid tax, which makes air travel to/from Hungary more expensive, and less competitive than it is to/from neighbouring Romania, Serbia, Croatia, Austria, or Slovakia.

At a time when Hungary and its tourism industry need to recover from the damage caused by Covid, Hungarian citizens and visitors need lower airfares, and more flights, not fewer flights and higher Govt. taxes. We hope the Hungarian Govt. will now accept the stupidity of this absurd tax, scrap it, and make Hungary a low-cost, competitive air travel and tourism destination once again, for the benefit of Hungarian citizens, their families, and visitors.”

ryanair
Read alsoWhat happens next? Ryanair refused to pay the Hungarian government’s gigantic fine

Good news: decline in Hungary tax-to-GDP ratio largest in EU

forint historic lows

The decline in Hungary’s tax-to-GDP ratio last year was the largest in the European Union, Finance Minister Mihaly Varga said on Friday, citing data compiled by Eurostat.

The Eurostat data show that the share of taxes and social contributions as a percentage of GDP in Hungary fell to 34.0 percent in 2021 from 36.1 percent in 2020. The average tax-to-GDP ratio for the EU as a whole stood at 41.7 percent in 2021. “The government continued to cut taxes this year, too, reducing employers’ taxes by 600 billion forints (EUR 1.46bn), preserving the country’s top position among EU countries in 2022 as well,” Varga said on Facebook.

forint historic lows
Read alsoHungarian minimum wage earners have to pay the highest taxes in the world

Budapest imposes building tax on Margaret Island

Margaret Island Budapest

The municipal council of Budapest voted to introduce a property tax on buildings on Margaret Island. The proposal was tabled by Mayor Gergely Karácsony and approved with 18 votes in favour, 12 against and 2 abstentions. From 1 January, owners of real estate on the island worth more than HUF 1 billion (EUR 2.4 million) will pay a 1 percent tax on the value of their property.

Setting an example for the districts, the Municipality of the capital will introduce a value-based building tax on Margaret Island, which it directly manages: from 1 January, a 1 percent tax will be payable on private luxury properties worth more than HUF 1 billion, the Municipal Assembly decided on Wednesday, napi.hu reports.

With the adoption of the proposal, the body asked Gergely Karácsony to make a proposal to the district municipalities to review their building tax regulations and to abolish any tax exemption for flats with a market value of more than one billion forints.

Gergely Karácsony stressed that their aim is to widen the scope for a fairer tax system, MTI reports.

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Read alsoHungary ranks 73 out of 140 in Rule of Law Index

Oppostion DK proposes tax-exempt utility support for employees

power-poles-electricity energy industry

The opposition Democratic Coalition (DK) has proposed allowing employers to provide employees with a utility bill benefit that would be exempt from taxes and contributions.

The benefit that would be made available to full-time employees would be maximised at a monthly 50,000 forints (EUR 121), DK lawmaker Ferenc Dávid told an online press conference.

Under the proposal, companies that require their employees to work from home would be mandated to provide the benefit in proportion to the duration of work shifts, Dávid, DK’s shadow economy minister, said.

The scheme would have to remain in place until March 31 next year, he said.

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Read alsoThe Democratic Coalition presents shadow cabinet

Tax cuts announced by the Hungarian Finance Minister

The government is preparing for the post-war situation by working to keep the economy on a trajectory to catch up with more developed economies, the employment rate at the current level and to draw further investments, Finance Minister Mihály Varga said on Monday.

Varga told a crisis management conference of the Budapest Chamber of Commerce and Industry that the measures taken to maintain stability and balance last year should be continued.

The government will, at the same time, propose amendments to tax regulations to ease the administrative burden on flat-rate taxpayers and tweak corporate taxes, he said. Under the proposal, flat-rate tax returns will be due quarterly rather than monthly, and the companies will be able to choose progressive tax payments up to a revenue of 25 million forints, he said.

Further, the government has launched a programme to improve SMEs’ energy efficiency, along with a scheme to help large corporations maintain manufacturing plants in the country.

Meanwhile, it is important to support the production of alternative energy to curb the country’s dependence on energy imports, he said.

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Read alsoHungarian minimum wage earners have to pay the highest taxes in the world

Regarding the central bank’s recent interest rate hikes, Varga said those steps served stability. Loan interests are expected to rise to as high as 10-15 percent this year, while inflation is expected to hit 14 percent, he said.

In addition, Hungary has been hit by severe droughts that curbed agricultural and food industry performance by 40 percent, he said.

The government is working to curb the fallout of those “blows” on the Hungarian economy, he said.

“I am sure we will be able to reach an agreement with the European Commission on the resources Hungary is entitled to,”

he said. Hungary is fulfilling the EC’s requirements, and its steps may be approved in December, he said.

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Read alsoDespite Hungary’s veto, the EU will introduce a global minimum tax

Hungarian minimum wage earners have to pay the highest taxes in the world

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The Hungarian tax system has been the subject of numerous criticisms as it tends to favour wealthier citizens. However, there are discounts for those who earn the least in Hungary. 

Hungarian minimum wage earners have the highest tax burden

The annual report of the International Labor Organization (ILO) contains information about taxation in Hungary. They examined the taxation of the minimum wage in 42 countries. According to their analysis, the tax burden on minimum wage earners is the highest in Hungary worldwide, reports 7g.hu. Only Germany has higher taxes, but several member states of the United States, as well as Belgium, impose fewer taxes on minimum wage earners.

High-income earners pay particularly low taxes

While the poor are struggling to pay huge amounts of money, the wealthier class enjoys particularly low taxes. Out of 154 countries and territories, Hungary has the 59th lowest taxation of high-income earners, writes 24.hu. Among European countries, only the similarly or less developed countries (Albania, Montenegro, Moldova, Bulgaria) apply lower taxes. The only developed country that applies income taxes similar to Hungary is New Zealand. However, there are discounts for low earners there, too.

Being single and poor is the most expensive in Hungary

Those Hungarian taxpayers who live alone and have no children pay a particularly high amount of taxes. There is no other developed country where a childless worker earning half the average wage would have to pay such a high tax burden as in Hungary. Those earning half of the average wage must pay 1,6 times the average deduction typical among OECD members from their wages to public costs. Even in Belgium, which imposes the highest tax burden in the world, it is much better to be poor in terms of taxation than in Hungary. Belgian workers earning half the average wage pay a third less in taxes and contributions than Hungarians.

Family support

Although people living in Hungary have to pay high taxes, there are some discounts, too. The government expresses its support towards families in the form of family support money. Since 2009, it is HUF 12,000 (EUR 28,26) per month for one child, HUF 13,300 (EUR 31,33) for two children, and HUF 16,000 (EUR 37,69) for three or more children. However, this is still shockingly low according to the OECD report. A family with an average income pays more taxes on their income in Hungary than the average in developed countries.

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Read alsoSeven-year record broken: many people started to advertise their property in Hungary

Hungarian opposition appeals to top court against small business tax changes

basic income hungary finance

Parties of the parliamentary opposition have appealed to the Constitutional Court to scrap a recent law changing regulations concerning the small business tax (kata), the head of Momentum told a press conference broadcast online in front of the top court building in Budapest on Wednesday.

Ferenc Gelencsér said the passage of the law had violated the constitution. He said the new legislation had involved fundamental changes for hundreds of thousands of taxpayers, stripping them of a predictable business and introducing unnecessary and unjustified discrimination between them.

Gelencsér insisted the government had “raised the tax for 400,000 people overnight just to make up for the funds it had squandered before the general election”. Gelencsér said the kata system had called for reform, but added that the government could have resorted to “simpler, constitutional and secure” means at its disposal.

Budapest Airport Wizz Air travel bus
Read alsoBudapest Airport received an award and a huge fine at the same time

Ryanair reduces its Budapest flights on seven routes during the winter season

Michael O'Leary ryanair

Ryanair is to reduce its Budapest flights on seven routes this winter season in response to the Hungarian government’s recently introduced extra profit tax, Ryanair CEO Michael O’Leary announced in Budapest.

The head of the Irish low-cost airline could not specify at a press conference on Tuesday on which seven routes the airline would cut flights. Later the company sent the details with the reduced frequency routes:

Amman, Bristol, Pisa, Prague, Sofia, Tel Aviv and Warsaw will see fewer flights.

On 11 August, Ryanair announced the cancellation of eight of its Budapest destinations: from October, the Irish flag carrier will no longer fly to Bordeaux, Bournemouth, Cologne, Kaunas, Krakow, Lappeenranta, Riga and Turin. The move will reduce the number of Ryanair’s Budapest routes from 53 to 45.

In a statement shared before the press conference, O’Leary repeatedly described the extra profit tax as nonsense and regretted that he could not announce the launch of new routes. Details HERE: This is why Ryanair received a huge fine from the Hungarian government. But Budapest was still better off than some other Ryanair bases, with Athens and Brussels, for example, closing for the winter.

Ryanair Group CEO Michael O’Leary said:

“We deeply regret that we are not in Hungary today to announce new routes and further growth for Winter 22, as we are in many other European countries. The Hungarian Govt’s idiotic “excess profits” tax on the loss-making air transport sector (and Hungarian citizens/visitors) has done nothing but damage Hungarian tourism, connectivity, traffic, and jobs as evidenced by these severe cuts to our Budapest winter schedule, which were made in direct response to this ridiculous “excess profits” tax.

The only thing more ridiculous than the Hungarian Govt’s decision to impose an “excess profits” tax on the loss-making airline industry is the Hungarian CPA’s decision to impose a completely baseless fine, which was strangely announced by the Hungarian Justice Minister on Facebook even before Ryanair was notified. This doesn’t say much for the independence or integrity of the CPA! Ryanair had appealed this baseless fine imposed by the CPA which we will ultimately overturn before the EU Courts on the basis that EU law guarantees airlines the freedom to set prices without any interference from national Govts, and we are permitted by EU law to pass on retrospective taxes to consumers – including this idiotic “excess profits” tax.

We now call on the Hungarian Govt to stop punishing Hungarian families and abolish its idiotic “excess profits” tax on the loss-making airline sector immediately, before even more damage is done to Hungary air travel and tourism.”

ryanair
Michael O’Leary, the Group CEO of Ryanair. Photo: Alpár Kató / Daily News Hungary

Mr. O’Leary repeatedly stressed during the press conference that he believed Hungary and Budapest would become less competitive with regional cities as a result of the government’s decisions. Budapest is being made a more expensive destination, while all neighbouring countries are more concerned with attracting passengers.

The CEO also said that they were prepared for the Hungarian consumer protection authorities to reject Ryanair’s appeal against the HUF 300 million (EUR 746,873.60) fine, but are ready to take the case to the European Court of Justice. The Ryanair boss is sure he is right and will fight to prove it.

Mr O’Leary was asked if he had already sent the book Economics for Dummies to Márton Nagy, to which he gave a positive answer. He was also asked whether it would have been better if he had not gotten into a war of words with the Hungarian government because it would have given him the impression of a bully as the head of one of the world’s biggest airlines. O’Leary said it would not have been better for the world’s fifth largest airline to have remained silent when the Hungarian government was in fact hitting Hungarian passengers with the extra tax.

The Ryanair chief said that despite the cancellations and thinning, they would not be at a competitive disadvantage against their biggest domestic rival, Wizz Air, which had already made a cut in its own offering. Furthermore, he believes Ryanair is a more attractive company, if only because he considers himself to be a better-looking CEO than the head of his competitor. Staying on the humorous side, he also thanked Gergely Gulyás for “worrying” about his health when he said he had too much alcohol when he was young, in response to a journalist’s question.

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Michael O’Leary, the Group CEO of Ryanair. Photo: Alpár Kató / Daily News Hungary

Ryanair
Read alsoRyanair refuses to pay Hungary’s departure tax: appeal submitted

Despite Hungary’s veto, the EU will introduce a global minimum tax

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The Hungarian diplomacy has previously accepted, but now vetoed, the European Union’s proposal. Brussels wants to work with member states to adopt a global minimum corporate tax law.

Hungarian veto in the EU

“Tax laws can only be adopted in the European Union if they are supported by all member states,” Prime Minister Gergely Gulyás said at a cabinet briefing on Thursday. Gulyás argued that the European Union would not be able to accept a proposal that the Hungarian government did not like.

Brussels is asking Member States whether they would be willing to vote in favour of a 15 percent global minimum corporate tax. This could be done in the framework of a so-called enhanced cooperation. This would not require 100 percent support, hvg.hu reports. If the plan succeeds, EU finance ministers could vote on the global minimum corporate tax law in Luxembourg in October.

Food price inflation
Read alsoHuge shortages: new price explosion coming in Hungary

Global minimum tax

US Treasury Secretary Janet Yellen invented the global corporate minimum tax to fill the US coffers. Something similar is needed for the European Union. The Covid pandemic, the energy crisis and Russia’s war in Ukraine have all had a negative impact on finances.

The Organisation for Economic Co-operation and Development (OECD) has developed the proposal, which is backed by more than 130 Member States. The support is so high because everyone would like to see multinationals taxed where the profits are made, rather than in tax havens.

The global corporate minimum tax only applies to large global companies. Giant global companies with an annual turnover of more than USD 750 million (EUR 746 million). US Republicans oppose a global corporate minimum tax. It is possible that this is why Hungarian Prime Minister Viktor Orbán decided to veto it. Brussels now wants to bypass the Hungarian veto.

Minister of Foreign Affairs Péter Szijjártó spoke about the global minimum tax in Washington this summer, Index.hu reports. “The introduction of a global corporate minimum tax would be a virtual coup de grace for the European economy in the current situation, and the measure would also put Hungary to an extraordinary test,” the Foreign Minister said.

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Read alsoInflation in Hungary: the worst is yet to come

Hungarian tax authority signs cooperation pact with Saudi counterpart

Hungarian tax and customs authority NAV on Monday said it has signed a cooperation agreement with Saudi Arabia’s tax and customs authority.

The agreement was signed in Budapest by NAV chief Ferenc Vágújhelyi and the head of the Saudi Zakat, Tax, and Customs Authority, Suhail bin Mohammed Abanmi, NAV told MTI.

The two authorities agreed on the framework of their cooperation with regard to tax adjustment, information sharing, the organisation of seminars, work visits and joint projects.

NAV also shared with the Saudi authority its experiences with the integration of Hungary’s tax and customs authorities, its innovations concerning customs control, digitalisation solutions and results, the statement said.

Wizz Air Hungary
Read alsoWizz Air to launch Budapest-Saudi Arabia flights in 2023

Socialists: where is the cheap Russian gas Orbán promised?

Viktor Orbán sad

The Socialist party is holding forums nationwide in the coming weeks to promote its proposals to address the cost of living crisis, party co-leader Bertalan Tóth told an online press conference streamed on Facebook on Saturday.

The first and most important one is that “the government should stop profiteering on Hungarian families,” Tóth said, referring to rising utility costs. Domestic power production is not influenced by war and inflation, Tóth said. The Paks nuclear power plant generates electricity for 12 forints (EUR 0.029)per kW; it should be sold at cost to consumers, he said.

Gas would not have be sold to household consumers at seven times the earlier price either if Viktor Orbán and Péter Szijjártó told the truth about the long-term gas supply contract signed with Gazprom, Tóth said. They said this contract guaranteed cheap gas in Hungary, he added. If they had told the truth, there would be 4.5 billion cubic metres of cheap gas, which would more than cover the 3.5 million cubic metres of household demand, Tóth said.

The Socialists are proposing the introduction of a basic utility service that would provide everyone with access to the gas and electricity necessary for subsistence. The VAT on electricity, gas and household fuel should be reduced from the current 27 percent to 5 percent, Tóth said.

“The reason we are in such trouble now is because the government has been neglecting energy efficiency for 12 years,”

the MSZP co-leader said. Therefore, the party is proposing a nationwide building insulation programme so that households can reduce their energy expenses. The money the government is spending to buy Vodafone would be enough to give 100,000 households 3.5 million forints in subsidies for improving energy efficiency, he added.

MSZP’s other co-chair, Ágnes Kunhalmi, said the crisis was not rooted only in the sanctions and the war, the Hungarian economy was already in trouble earlier as the government deliberately weakened the forint and inflation was already high before the war broke out, she said.

“The social crisis is due to the government’s bad economic policy,” Kunhalmi said. Kunhalmi called for an agreement with the European Union, which could provide a lot of money, for energy-efficiency upgrades, for example.

She also urged the government to join the global minimum tax, which is 15 percent while capital income in Hungary is taxed at 9 percent. She also called for windfall taxes to be extended to oligarchs. These measures would create revenue to help Hungarian families and create social and energy security, Kunhalmi said.

Extending the reduced VAT rate for home construction in Hungary

A 5 percent preferential VAT rate for home construction which has been extended until the end of 2024 could be applicable up until December 31, 2028 provided that construction begins by 2024, Finance Minister Mihály Varga said on Tuesday.

The preferential VAT rate saves taxpayers 200 billion forints (EUR 487.4m) a year, Varga said on Facebook.

The extension of the preferential VAT rate until the end of 2028 has been initiated by construction industry association ÉVOSZ (Építési Vállalkozók Országos Szakszövetsége), the minister said. According to ÉVOSZ’s proposal, the VAT rate should remain applicable if a home building permit is approved by the end of 2024 or if construction on the home in question begins by then, he said.

The finance ministry has examined and approved the association’s request, Varga said, adding that the proposal could go before parliament in the autumn.

As we wrote earlier, Hungary has the highest house price growth in Europe, read more HERE.

Budapest houses flats
Read alsoApartment rent prices in Budapest brutal high!

Hungary will be facing challenging times in the next three months

Budapest Hungary

Hungary will be facing a great number of difficulties in the next period. Rising overheads, petrol supply shortages, the adverse consequences of the KATA tax alterations, worsening drought and higher-than-ever inflation will make life extremely challenging for both locals and the Hungarian government. 

20 percent inflation

The Magyar Nemzeti Bank (National Bank of Hungary) frequently stresses that domestic inflation is of foreign origin. The Hungarian government also partially attributes the rising inflation to the ongoing war. However, it is time to consider the domestic factors as well instead of merely focusing on the external ones, telex.hu writes.

The real reason behind the surging inflation, swiftly approaching 20 percent, is a complex matter, privatbankar.hu writes. According to János Nagy, an analyst at Erste Bank, the peak is expected to hit the country in early 2023. The problems are manifold. Tax hikes, drought and petrol-related issues are all contributing to the rise of inflation. According to Lajos Török, a senior analyst at Equilor Zrt., “The increase in the tariffs (the partial “re-marketing” of gas and electricity), which has already come into effect in August, will have a direct impact on inflation of 3-4 percentage points.”

Changing petrol price cap

The impact of the changing petrol price cap regulations is still minimal, currently below 1 percent. The retail price cap is in force until 1 October unless renewed. Lajos Török says it was unlikely to be extended by the Hungarian government. There is already a supply shortage at many petrol stations. Consequently, another 2-3 percentage points of additional inflation can be expected in November.

Changes in KATA taxation

From an inflation perspective, the KATA tax overhaul is ominous. Analysts cannot tell who will stay with this tax regime. If those who still opt for KATA raise their prices, market prices will also surge. This can have an inflationary impact of up to 1 percent.

Hungary Ryanair Airline Tax
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Worsening drought

The matter of food prices is a complex issue. Some products already cost 30-40 percent more than last year. This is exacerbated by the drought and the ongoing war between Russia and Ukraine. Shrinkflation, the process of [food] items shrinking in size or quantity, or even sometimes reformulating or reducing quality, is already present in many shops. However, this trend is not yet seen when it comes to services.

There is hope though

There is still some hope to hold onto. The end of the Russian-Ukrainian war would certainly help the current situation. The impact of the interest rate rise will be felt in about 6 quarters. The impact of the interest rate hike in the summer of 2021 will be also experienced soon. Furthermore, there are projections that inflation will peak all across the EU. This will at least reduce the amount of money Hungary borrows from abroad. In addition, rising inflation will also lead to lower consumption.

OMV fuel station
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