Hungary will lose millions of EUR in taxes in 2024 and its economy is faltering
Joe Biden’s global minimum tax (GMT) scheme will kick off next year. The first pillar will concern companies with a higher than EUR 750 million global net income. That means only two Hungarian companies, MOL and OTP. However, it affects the entire German carmaking industry, which generates a profit in Hungary even during the contraction of the economy.
According to portfolio.hu, companies
- generating EUR 750 million global net income,
- headquarters or subsidiaries in any of the 130 countries joining the scheme,
- and a higher than EUR 4 million aggregated balance sheet with a minimum EUR 8 million net revenue
will have to pay at least 15% corporation tax. If they pay less, they will have to pay a top-up tax in the country where they have their headquarters. In Hungary, the scheme concerns MOL, OTP and German carmakers like Audi, Mercedes and BMW.
As a result of the scheme, there will be countries that lose substantial amounts of tax money, while others will come out as winners. In the latter category are the developed countries like the United States (that is why the initiative came from Washington), Japan, South Korea, Germany, China and Australia. Hungary will be in the category of losers. The amount the Hungarian state budget will lose is exorbitant: 19.9 million euros net, which is 0.06% of the country’s tax revenues. The news outlet highlighted that there were many uncertainties surrounding the scheme. Thus, the figures may change. Nevertheless, Hungary’s position in the new global system will probably remain on the tax losers’ side. Even though we desperately need that money.
Read also:
- Large American manufacturer leaves Hungary, laying off hundreds of employees – Read more HERE
- Government ousts foreign companies in this sector in Hungary
Nobody expected such daunting GDP data
As we wrote HERE, the shocking GDP data just dropped this morning. The 2.4% contraction in 2023 Q2 (compared to Q2 2022) means that the Hungarian economy has been faltering for four quarters years, which the last time happened back in 1996. Furthermore, it clearly indicates that the Hungarian economy is not progressing the way the Hungarian government wished or hoped for. According to g7.hu, nobody expected such a high decrease rate, experts calculated a minus 1.2% contraction. In the EU, only Estonia and Sweden performed worse than Hungary.
There are multiple reasons behind the poor performance of the Hungarian economy: high inflation, lack of state investments and blocked EU money due to the rule of law procedures. Besides, no segment of the Hungarian economy is booming except for the German car industry. Péter Virovácz, a senior analyst of the ING, said the Hungarian government’s hopes for a 1.5% GDP increase in 2023 are surrealistic. He believes the Hungarian economy will contract in 2023, so the budget will need every tax source it can access. Thus, the global minimum tax’s introduction comes at the worst time.
Extraordinary cabinet meeting held by PM Orbán yesterday
Prime Minister Viktor Orbán held a cabinet meeting in his office, the PM’s press chief said on Wednesday. Ministers reviewed issues related to the war in Ukraine, the prospects for achieving peace as soon as possible, as well as issues triggered by the “Brussels” war-related sanctions, Bertalan Havasi said in a statement. Furthermore, they discussed government measures aimed at curbing inflation and ensuring cheap household energy bills, the statement added.
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