Hungarian parliament passes controversial 2015 budget

December 15, 2014

Orszaghaz

By a vote of 131 in favor to 62 opposed, Hungary’s unicameral parliament passed the 2015 budget bill on Monday despite strong opposition from civil organizations and trade unions for drastically curtailing social spending even as it introduces new taxes.

The new budget bill proposed in October by Mihály Varga, minister of national economics, shortly after October’s local elections was amended over the course of December.  However, budget has been widely criticized for containing some HUF 200 billion worth of state revenues unlikely to materialize.

Among other things, Hungary’s 2015 budget will contain the following new sources of state revenue:

  • Sectoral bank taxes will be expanded to include investment fund merchants who will have to pay a 25 percent tax on all transaction fees
  • Environment-protection taxes will be expanded to include cleaning liquids, soap, and stationery products
  • Food-retail chains are to pay additional supervisory taxes.  Food-retailing chains producing losses for two consecutive years are to lose their operating permits in 2018.   Furthermore, shops over 400 square meter area are to remain closed on Sundays.
  • Tax on the cafeteria system (extra-salary benefits for private company employees) will increase from 35.7% to 51.17% in the case of gross salaries over a monthly HUF 200,000 (USD 805)

The budget allocates an additional HUF 87 billion for public work.  At the same time it cuts social spending some 3.7 percent from HUF 933 billion to HUF 900 billion.  It also decreases by HUF 20 billion supports paid to families and women on maternity leave.  Vg.hu reports that the government will save some HUF 30 billion on pensions of those who take early retirement.

The government has justified these cuts in entitlement spending by referring to the need to decrease the national debt and to keep the deficit to well under 3 perdent of GDP. However, such concerns have not dampened the government’s enthusiasm for sports and sport related investments.  Vg.hu points out that the 2015 budget provides for a 25 percent increase in government funding of sports.  Some HUF 122 billion (USD 500 million) is to be spent in 2015 including the reconstruction of the Ferenc Puskás stadium, and the development of a National Olympic center.

Index.hu notes that “hidden” tax increases means the typical Hungarian will pay nearly one-third more in taxes than they did four years ago.  It also notes that much of the projected revenue is in the form of one-time transactions, some of which are vaguely defined.

The new taxes on “extra profits in the private sector” add to the already large tax burden on Hungarian employers and consumers in addition to the 27 percent value added tax (VAT), one of Europe’s highest.   Gone from the budget is the offending internet usage tax which use caused over 100,000 protesters to take to the streets in late October.  However, prime minister Viktor Orbán has made it clear that he has not entirely ruled out introducing such a tax in the future.

Although the budget does not provide for the immediate nationalization of some HUF 205 billion in private pension funds, it does provide for funds to be wound up and their assets under management transferred to the state in those cases where more than 30 percent of members fail to pay membership fees over the course of the preceding six months.   Index.hu claims that this is a pretext for nationalizing the private fund assets of at least two major pension fund managers in October 2015.

The 2015 State Budget Act amends a total number of 100 existing laws.

Opposition parties of the left and right voiced their serious concerns over the budget.

The Hungarian Socialist Party (MSZP) called the measures “extraordinary austerity” intended to reduce the national deficit. Socialist MP Sándor Burány called the new taxes as a legislative form of “simple money collection.” According to the Socialists, previous special taxes already “showed the failure” of the government’s policies, and “this is why they would need more taxes.”

Jobbik said that “encoded in the present budget” is the failure of the Hungarian economy to achieve growth, liking the austerity to that of the Socialist-Liberal government of 2006-2007. Green-left Politics Can Be Different (LMP) said that the budget favors the “richest ten percent” of society while leaving everyone else behind, doing away with savings and workplaces during 2015, and therefore “contributes to a widening social gap” in Hungarian society.

Liberal Together 2014 condemned the budget saying that recent protests and partial road blockades “indicate what the people think about the budget. The budget means a direct continuation of Fidesz policies in 2015, that carries only one message: Everything for Viktor Orbán and nothing for anyone else” Together MP Zsuzsanna Szelényi told the press after the vote. Leftist-liberal Dialogue for Hungary (PM) said that, if carried out, the budget means that “We are all going to starve.”

PM

PM MPs expressed their dissatisfaction with the budget by holding up a banner in parliament which says “The country cannot take any more of this!  You have lost your minds!

Democratic Coalition, a market liberal  opposition party mostly organizing around the figure of former prime minister Ferenc Gyurcsány reacted to the enactment arguing that it means that the government “is prepared to leave behind everyone who is in trouble.”

A mass protest against the budget has been organized by various opposition facebook groups for Tuesday evening.

Referenced in this article:

http://hvg.hu/gazdasag/20141215_Megszavaztak_a_koltsegvetest

http://hvg.hu/gazdasag/20141210_A_2012es_hasonlo_megszoritasok_johetnek

http://tenytar.blog.hu/2014/11/05/2015_a_megszoritasok_eve_ime_az_uj_adok

http://www.parlament.hu/irom40/01794/01794.pdf

https://www.facebook.com/events/887225927968458/?ref_newsfeed_story_type=regular

http://www.vg.hu/gazdasag/gazdasagpolitika/tobb-sport-es-kozmunka-kevesebb-szocialis-tamogatas-kesz-a-koltsegvetes-440731

http://index.hu/gazdasag/2014/12/15/koltsegvetes_megszavazasa/