On tension and taxation – BBJ

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The good news is that in the two weeks since our last edition, Europe has not slipped into a war, at least not at the time of this writing. But Russia’s recognition of the two dissident rebel-held areas and the sending of its troops there to act as “peacekeepers” have further escalated the tension. It seems unsustainable. Either one side will have to back down, or someone, out of breath, will make a mistake and start the conflict no one says they want.

Hungary is politically closer to Russia than any other state in the European Union. Indeed, as we pointed out in our last issue, Prime Minister Viktor Orbán has not returned for a long time from a visit to Vladimir Putin in Moscow, although his trip was scheduled, rather than a tour of the shuttle diplomacy that saw a series of world leaders make their way to the Kremlin in response to the Ukraine crisis.

It was therefore instructive to hear Minister of Foreign Affairs and Trade Péter Szijjártó talk about another batch of 120 ventilators that Hungary is donating to Ukraine. Half of the ventilators are to go to hospitals in Transcarpathia, a region of Ukraine with a large ethnic Hungarian population. Szijjártó acknowledged “tensions” between Hungary and Ukraine regarding what he called “violations of the rights of the Hungarian ethnic minority” in the country. Despite this, he said, “Hungary has always supported the territorial integrity and sovereignty of Ukraine.”

Importantly, this message was confirmed on Tuesday when Orbán spoke by telephone with Ukrainian President Volodymyr Zelenskyy. As a neighbor of Ukraine, Hungary is following developments with concern, the Prime Minister said. He told Zelenskyy that the country supports joint European Union efforts to resolve the situation.

“In this framework, the government is constantly consulting its Western allies,” Orbán was quoted as saying by the official MTI news agency. He stressed that Hungary has supported, and continues to do so, the sovereignty and territorial integrity of Ukraine.

* * * * *

I had forgotten how different the Hungarian tax system is until conversations with economic experts at our recent Expat CEO Boardroom event and for this issue’s Market Talk article forced me to refocus.

As clearly stated on the inside pages, Hungary is something of an exception with its focus on indirect and consumption taxes. Much less emphasis is placed on income tax and in particular on corporation tax; indeed, the country’s 9% for the latter is the lowest in the European Union and the fourth lowest in the world. (Presumably there aren’t many Budapest Business Journal readers who are unhappy with this.) The good news is that Hungary has made huge strides in its digitalization journey and can (and should) be part of it. congratulated.

Less welcome, however, is the large number of existing taxes. One of our expert witnesses puts it at almost 50, although 90% of all income comes from just eight. The other 40 or so may be insignificant in terms of what they generate, but they still cause an administrative burden, both for the authorities and for the poor blinded taxpayer. How nice it would be to see a simpler, leaner version. We can only hope.

Robin Marshall

Chief Editor

This article first appeared in the print issue of the Budapest Business Journal on February 25, 2022.

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