The government is making a new decision for all Hungarian local governments.

The government decision recorded by Prime Minister Viktor Orbán reads as follows:

1. In the fiscal year ending in 2021, the rate of the local tax and the local tax may not be higher than the rate of the same local tax, local tax established in the current municipal tax decree and applicable on the date of entry into force of this Decree.
2. The local government will also provide tax exemptions and allowances in accordance with its tax decree in effect on the effective date of this Decree in the fiscal year ending in 2021.
3. The local government does not have the right to introduce a new local tax or a new local tax for 2021.

According to the decision, the above rules will go into effect the day after the announcement, that is, on Wednesday, and will expire on February 8.

The government accepted one of László Parragh’s proposals

The current decree also means that the government has accepted one of the recent proposals from the president of the Hungarian Chamber of Commerce and Industry regarding local taxes. Two weeks ago, László Parragh stated in a newspaper interview that

In addition, we recommend that the government freeze the rates of other types of taxes that fall within the jurisdiction of the municipality.

These include, but are not limited to, property taxes, tourist taxes, construction taxes, and communal taxes.

He also added that the recently re-elected president of MKIK added that the objective of his proposal was not to compensate local governments for the loss of business tax revenue by increasing other types of taxes, thus ensuring that the burden on SMEs would actually be reduced. .

The case is not without precedent. Prime Minister Viktor Orbán consulted with László Parragh 3 weeks ago, where the prime minister asked the president of the Hungarian Chamber of Commerce and Industry to make a proposal to the government to help small and medium-sized businesses. Later, László Parragh made his first seemingly radical proposal for a temporary exemption from the local business tax, but the government is waiting for a proposal on the business tax, presumably because it has encountered serious resistance. Recently, the Secretary of State for Taxation, Norbert Izer, told InfoRádio that there is no final decision on business tax rules. “Several proposals have been received in the recent period, their evaluation is still ongoing. There are no radical changes to local taxes in the tax laws approved by parliament,” said the secretary of state in the Finance Ministry.

We have written in detail in this article about the expected consequences of this proposal.

There may be two readings of the government’s decision and two sides of the coin: on the one hand, the government still supports national companies and, on the other hand, it blocks one of the escape routes from the settlements.
It is clear that the government is following the proposals launched by the president of the MKIK regarding the issue of the imposition of local taxes. In the case of local taxes, it seems a lot that companies have sided with local governments, which have begun to raise local taxes or apply new taxes due to the difficult situation of the coronavirus crisis and tighter budgets (For example, business tax revenue falls automatically during a crisis). , since the turnover of the companies, which is in part the base of the tax, also decreases, which automatically leads to a loss of revenue for local governments). More recently, Salgótarján announced that they would increase the tourist tax rate starting in January and impose a tax on land owned by companies that do not serve productive purposes. But two months ago, Mayor Gergely Karácsony introduced a new special tax called the reset tax. The government decision that takes effect on Wednesday will stifle these settlement initiatives, budget bailouts and measures to compensate for lost income in their infancy. After that, it will be especially interesting to see if the government accepts László Parragh’s other proposal on local taxes, the two-year suspension of the business tax. Such a decision, in addition to the current proposal, would fundamentally and radically limit the room for maneuver of local governments and would make it impossible to finance local services (public transport, urban management, public services, maintenance of kindergartens, nurseries) and thus affect directly to the quality of life in the settlements.

Thus argues the Ministry of Finance

Simultaneously with the publication of the decree, the Ministry of Finance issued a notice. “With the latest government action due to the coronavirus epidemic

helps Hungarian companies, families and people in difficult situations

– informs the portfolio. “The government decree published today in Magyar Közlöny stipulates that the local and local tax rate cannot be increased next year. Tax benefits and tax exemptions cannot be limited or reduced either, as they must also be provided in 2021. local governments cannot introduce new local government taxes next year. tax “- summarizes the government’s tax decision in the prime minister’s communication. “The government helps companies and employers in difficult situations due to the epidemic with tax cuts, thus contributing to the relaunch of the Hungarian economy. The decree published in today’s Hungarian Gazette guarantees the protection of the population, families and women. companies, like no local government “, argues the portfolio.

Cover image: In the image published by the Prime Minister’s Press Office, Prime Minister Viktor Orbán (j) meets with László Parragh, President of the Hungarian Chamber of Commerce and Industry (MKIK) (b) at the Monastery Carmelita on November 8, 2020. In front of Antal Rogán, Minister (s) in charge of the Prime Minister’s Office, with Márton Nagy, Acting Prime Minister and Economic Policy Advisor. Source: MTI / Prime Minister’s Press Office / Zoltán Fischer