Factsheet for case HU-2021-1/1678 – measures in Hungary
|Country||Hungary , applies nationwide|
|Time period||Temporary, 01 January 2021 – 31 December 2021|
|Type||Legislations or other statutory regulations|
Supporting businesses to stay afloat
|Author||Nóra Krokovay (KOPINT-Tárki) and Eurofound|
|Case created||08 January 2021 (updated 14 January 2021)|
Under a government decree published on 22 December 2020 (639/2020), small and medium-sized firms and micro-companies will receive a reduction in their local business tax collected by the municipality where the company is registered. The Act 100/1990 on local government taxes defines the local tax as a percentage of net revenue, often with a limit up to which no tax is paid.
Under the measure, companies will pay 50% of their local business tax on revenue in the tax year 2021. The tax will also be capped at 1% for companies defined as small (revenue below HUF 4 billion (€11.1 million) per year). For municipalities with fewer than 25,000 residents, the government will order a compensation of the tax revenue shortfall, and for larger cities, financial needs will be examined on a case-by-case basis, according to press reports, but no specifics of this compensation have been made public. All SMEs and micro-companies are eligible, regardless of the sector they work in.
To be eligible businesses must:
Average tax revenues from the local business tax in 2020 (estimates):
Local tax revenues total about HUF 800 billion (€2.22 million) a year, the shortfall from the current measure is estimated at HUF 150-200 billion (€417-556 million).
|Does not apply to workers||
||Does not apply to citizens|
Local / regional government
No special funding required
Social partners' role in designing the measure and form of involvement:
|Trade unions||Employers' organisations|
|Role||No involvement||No involvement|
|Form||Not applicable||Not applicable|
Social partners' role in the implementation, monitoring and assessment phase:
The measure is considered politically-motivated by opposition-leaning cities. Mayors of the Alliance of Free Cities said the move would be a “final blow” to local councils and called for protests to remind citizens of the importance of public services offered by councils. The Hungarian National Association of Local Authorities TÖOSZ, an organisation representing more than half of Hungary’s 3155 municipalities, said in a statement that it is regrettable that the government had not consulted them prior to taking this measure. TOOSZ said COVID-19 support should go to targeted vulnerable sectors only and that company and payroll tax cuts would be a better way to go forward. MÖSZ (Hungarian Association of Local Governments) added that the government should immediately reveal the compensation plan it had promised to cities. The trade union confederation MASZSZ said the measure will not help those in need and has warned that it could even lead to the loss of local council jobs that are financed from the local business tax revenue (interview, MASZSZ dep. leader)
Eurofound (2021), Local business tax reduction and cap, case HU-2021-1/1678 (measures in Hungary), COVID-19 EU PolicyWatch, Dublin, http://eurofound.link/covid19eupolicywatch
Disclaimer: This information has not been subject to the full Eurofound evaluation, editorial and publication process. All information is preliminary and subject to change.