Hungary Insists on Keeping the Competitive Tax System

Hungary Insists on Keeping the Competitive Tax System

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„Hungary opposes the introduction of the common corporate income tax base, or a new type of VAT in the European Union, and insists on keeping its competitive tax system” said Hungarian Minister of Finance Mihály Varga in Bucharest at an informal meeting of the European Union’s Financial Ministers on 5 April 2019.

The debate about the 2021-2027 European Union’s budget is on schedule. Based on some rumors, the EU would like to increase its income with newly introduced taxes at the same time with the (anticipated) financial restrictions, so that the EU budget would not decrease dramatically. 

Mihály Varga outlined that Hungary does not intend to increase the tax burden on enterprises, since the Government believes that low tax rates are a key element to the competitiveness. He also mentioned that there are opposers of this new system also inside the EU, such as the Dutch Government, arguing that tax policy should remain a sovereign decision of the Member States in order to enhance the economic prosperity.  

The Hungarian Minister of Finance stated that “Hungary cannot accept an EU budget that would cut the cohesion support, to transfer it to more developed states in order to resolve their unemployment problems.” According to the original proposal, the EU would differentiate between states on the basis of their currency in the following budgetary cycle. The Minister believes that it would not be a good decision-making process where the EU differentiates between Member States using the common currency and between others that are not.

The future budget will be launched on 1 January 2021, until then an agreement should be reached. The first draft containing exact figures is expected to be approved in October 2019

By Eszter Kamocsay-Berta, Managing Partner, KCG Partners Law Firm