Monthly newsletter Hungary – August 2022
Demonstrations after KATA tax reform
At a press conference on July 13, the Hungarian government announced a reform of the KATA tax (flat tax for small businesses and service providers) to put an end to tax evasion and unlawful concealment. Contrary to their original intention, three quarters of users are now abusing this form of taxation as false self-employed people for concealment. Many large companies would employ their employees as bogus self-employed people instead of regular permanent positions. The company would “save” taxes and the employee would receive more money.
Around 400,000 people also do not pay into the social security fund. Similar to health insurance, where the solidarity community paid for the financial benefits of individuals for a long time. Nevertheless, the rigorous and relatively short-term reform starting in September would mean an effective increase in the tax burden for many Hungarians, namely the vast majority of existing users (around 450,000). For this reason, there were several demonstrations in Budapest following the announcement.
Budget 2023 approved
Parliament approved the 2023 state budget on Tuesday. The budget expects economic growth of 4.1%, a deficit of 3.5% and average annual inflation of 5.2%. Budget expenditure was estimated at 33.426 trillion forints (around 82 billion euros), and expected revenues were put at 31.074 trillion forints (76.4 billion euros). Government debt is expected to fall further to 73.8% of GDP by the end of next year from 76.1% (forecast for the end of this year). In order to maintain economic growth and protect families, some passages of the budget law on economic stability should be changed. What is new, among other things, is the establishment of two funds that are intended to help overcome the challenges faced in the context of the war in Ukraine. On the one hand, there is the protection fund for supply cuts with 670 billion forints, around 1.6 billion euros, and on the other hand, the defense fund with 842 billion forints (2.1 billion euros). Critics complained that the draft no longer corresponded to current reality. The plan still calculates with inflation of 5.2% (most recently more than 10%) and a forint exchange rate to the euro of 370:1 (currently over 400 forint per euro).
Declaration of an energy emergency
The Hungarian government's declaration of an energy emergency, announced by Chancellery Minister Gergely Gulyás on July 13, 2022, includes a seven-point plan that will come into force in August and specifically provides for the following. Hungary's domestic gas production is to be increased from one and a half to two billion cubic meters, which the government estimates is possible. The gas storage facilities are currently 44 percent full, which would only ensure the country's gas supply for a quarter of a year. Domestic brown coal production is also to be boosted by the end of the year and the Mátra coal-fired power plant is to be put back into operation. It was also decided to ban the export of energy sources and firewood. Particular attention was paid to the plan to restrict the state-supported utility cost reduction program, which guarantees the Hungarian population energy prices that are well below the market price. Consumers who are above average will be asked to reduce their consumption and save energy in the future. Otherwise, once the average consumption is exceeded, the market price will no longer be charged, but the reduced price. This new regulation would currently affect around a quarter of Hungarian households.
Foreign Minister Szijjártó in Moscow
Foreign Minister Péter Szijjártó traveled to Moscow on July 21 for talks with several members of the Russian government, including Foreign Minister Sergei Lavrov. According to official information, this was about securing Hungarian gas supplies and finding a peace solution to the war in Ukraine. The Hungarian government wants to buy more Russian gas, which the Russians are currently examining. Szijjártó expressed Hungarian concerns about the European gas crisis, but also highlighted that the filling of Hungarian gas storage facilities, at 27.3%, was more advanced than the European average (17.3%). However, the country still lacks 700 million cubic meters of natural gas to ensure its energy security. Achieving this in Europe without sources from Russia is a “vain hope”. He again called for an immediate ceasefire and peace talks in Moscow. The date of the visit had been announced in advance to the President of the UN General Assembly.
EU Commission initiates further proceedings against Hungary
As Hungarian Justice Minister Judit Varga announced on her Facebook page in mid-July, the European Commission has initiated two further infringement proceedings against Hungary and has taken Hungary to the European Court of Justice in two cases. The first lawsuit is directed against the Hungarian “Child Protection Act”, which from the EU perspective violates the rights of the LGBTQ minority. Varga responded in her statement: “We have made it clear from the beginning that protecting minors and ensuring their moral development is a matter for the member states, and Hungary has not given up its sovereignty by joining the EU, but has only enabled the joint exercise of certain competencies.” The Vice President of the European Parliament, Katarina Barley, welcomed the Commission's actions: "The complaints are right, but they come too late for democracy in Hungary." The Commission “overslept for years” that Viktor Orbán was “dismantling democracy”. Now Hungary must cut its funding as quickly as possible.
The second lawsuit is directed against the withdrawal of the radio station Klubrádió's license for FM broadcasting, after which the radio station had to switch to Internet operation. According to the EU Commission, the conditions for renewing the broadcasting license were “disproportionate and non-transparent” and the reasons for the rejection were questionable. The government, however, replied that the decision had been made by a non-governmental authority and confirmed by an independent Hungarian court. The Hungarian licensing system allows all providers equal access. The infringement proceedings with a two-month deadline relate, on the one hand, to the export ban on grain and the refueling discount for residents in view of the war in Ukraine and the economic crisis situation. The Commission invoked the freedom of the internal market and the principle of non-discrimination, according to which “the measure […] is incompatible with EU rules on the common organization of the market”. The pursuit of certain economic objectives at national level is not justified and there is no need for intervention in the name of security of grain supply. Varga replied that the refueling measure had originally applied equally to everyone, but in the “inflation and war situation” increasing “tank tourism had threatened the security of supply” to such an extent that foreign license plates should have been excluded from the scope of the rules. The government also sent its preliminary comments to Brussels on grain exports.
Survey: 61 percent of Hungarians satisfied with the work of their government
According to a survey conducted by the pro-government Nézőpont Institute in twelve Central and Southeast European countries, people in Hungary are most satisfied with the work of their own government. 61 percent of Hungarians expressed their approval, closely followed by Serbia with 60 percent. Only a third of the populations of both countries rated themselves as dissatisfied with the government's work. What is particularly interesting is that in Hungary, where the elections to the Hungarian National Assembly recently took place on April 3, 2022, but also in Serbia, a higher level of satisfaction can be determined than would be reflected in the percentage election result. The researchers attribute this result to the country's high political stability, a value that cannot be taken for granted compared to other countries. In Bulgaria, Slovenia, Romania and Slovakia, dissatisfaction rates were over 70 percent.
Image for the article: »Protest in Hungary« by: gregoriosz
To the source:
The German-Hungarian Institute for European Cooperation is intended to provide a forum for academic, scientific and political dialogue between Germany and Hungary and to familiarize decision-makers and interested specialist audiences from both countries with topics, debates, processes, thought patterns and ideas from the other country. The aim is to achieve greater understanding, communication and constructive cooperation by objectifying the German-Hungarian discourse and thus renew our Europe together.
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