Gov’t looks for way to plug HUF 30 billion budget gap

July 23, 2015

budgetgap

The government of Hungary needs to come up with a way of plugging a HUF 30 billion hole in the budget caused by the suspension by the European Commission of a discriminative tax on certain supermarket companies, reports Hungarian news site Világgazdaság.

The government has defended the controversial tax by calling it a fair progressive tax, but the seven multinational supermarket chains that have to pay the bulk of it disagree.

The government, however, is keen on leveling what it considers to be an unfair playing field for smaller grocery retailers. Unfortunately, the European Commission’s position is that such tactics are anti-competitive and may constitute “restricted state support” to certain players in the market.

The tax on retailers is one of several sector-specific taxes targeting foreign-owned companies to which the EC has objected. Most recently, the government was forced to modify a progressive tax on advertising revenues after the European Commission determined it constituted an unfair burden on Hungary’s largest television broadcaster, RTL Klub.

According to Világgazdaság, the government may simply scrap the disputed “grocery regulatory” tax, which came into force this year, for an entirely new one.

Világgazdaság writes the government may return to the flat .1 percent grocery regulatory tax rate.   Such a tax would raise revenues of HUF 10 billion, or one-third of the HUF 30 billion the new tax was expected to produce.

The government could also raise the earlier tax to .3 percent and plug the gap entirely, but experts tell Világgazdaság that the government may just stick with .1 percent flat tax and find another way to plug the remaining HUF 20 billion gap in the budget.

The government has said nothing officially regarding its plans for the tax, but Minister Overseeing the Office of the Prime Minister János Lázár has publicly stated that one way or another the government is determined to force foreign companies to pay more taxes as a way of helping domestic retailers.