Launched by the Orbán government in 2011, the TAO program allows corporations to write off contributions to Hungarian sports clubs. To date, the single largest beneficiary of the TAO program has been the Felcsút football academy. The club was founded by Viktor Orbán in 2007 and is run by Lőrinc Mészáros, a man many hold to be Viktor Orbán’s strawman. Now, the Hungarian parliament has adopted legislation to make secret information related contributions made through the TAO program on grounds that this data constitutes “tax secrets.”
A finely-tuned program to keep information secret
In 2015, Transparency International Hungary issued a report which shines light on the serious corruption risks presented through the finely-tuned TAO contribution system. The suspicion raised by the NGO is that these contributions may be made to sports clubs tied to politicians in exchange for the donor being awarded lucrative public procurements.
Between 2011 and 2014 Hungarian soccer clubs received TAO contributions totaling HUF 74.5 billion (USD 276 million). Of this 28 percent (HUF 21 billion/USD 77 million) went to 13 clubs. And of the HUF 21 billion, HUF 9.2 billion (12 percent of all TAO contributions) went to the soccer academy located in Prime Minister Viktor Orbán’s home town of Felcsút. This amount represents 44 percent of TAO contributions received by the 13 most privileged soccer clubs.
Ultimately, contributions made by the donors are run through a rather complex process involving the Hungarian sporting federations and state authorities before finally landing in the pocket of the sport club.
Miklós Ligeti, legal director for Transparency International Hungary, argues that once these contributions are run through the process they are considered public funds — even by the European Commission’s standards.
“Basically, when corporations establish profit before paying taxes, they can decide whether to pay corporate income to taxes to the tax authority or to contribute to sports instead of paying corporate income tax,” Ligeti says.
“The fact that they make this contribution before paying taxes means that companies are essentially repurposing a certain proportion of their corporate tax. By doing so, they decrease the state’s revenues from corporate taxes. It is because of this that the European Commission, which had to approved the TAO program because it constitute state subsidies, also concluded that these corporate contributions to sports are considered public funds. This is legal basis of our position,” he says.
According to Hungarian law, contributors are not required to reveal who the beneficiary of their contribution is and the amount contributed. Similarly, the beneficiaries are not required by law to reveal the exact amount(s) and source(s) of these contributions.
Two sources have the data, but no one wants to share it
Prior to the adoption of the new TAO secrecy law earlier this week, Transparency International Hungary filed two separate lawsuits to find out which corporations have given how much to which sporting organizations.
The NGO decided to go to court after both the Hungarian tax authority and the sporting organizations refused to comply with Freedom of Information requests regarding the public funds circulating through the TAO program.
The first lawsuit, which TI filed against the Hungarian tax authority, is set to begin on December 8th. The second lawsuit (which has not been assigned a court date yet) was filed against the Hungarian sporting associations eligible to take part in the TAO program — football, basketball, handball, water polo and ice hockey.
It goes without saying that eyebrows were raised when Ministry of National Economics submitted a bill on Monday to classify information specifically related to the TAO contributions as “tax secrets.” The bill, which was submitted for an “urgent” vote, was adopted one day later.
On a side note, the Hungarian Socialist Party’s (MSZP) entire parliamentary group voted in favor of the bill. Later, the party said it mistakenly voted for the bill and then asked President János Áder not to sign the legislation into force.
The Transparency International legal director hopes progress will be made in the two lawsuits despite the government’s efforts to prevent this information from being made public.
“Hungary’s Freedom of Information law does not recognize tax secrecy as justifying circumstance for the refusal of an FOI request. This new law does not automatically prevent a judge from ruling that state organs and sport federations must reveal detailed data on this contributions,” he says.