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Hungarian Prime Minister Viktor Orban used his emergency powers to publish decrees on a sweeping set of windfall taxes and to order about $6.1 billion in spending cuts for this year and next.
The measures, which will hit industries from banking to energy and airlines to telecommunications, underscore the extent of the budget imbalance that has spooked investors at a time when the European Union has blocked billions of euros in funding over concerns about graft.
The government said last month that public spending cuts and savings will constitute 60% of the budget consolidation while revenue from windfall taxes will make up 40%.
The spending cuts include a 10% reduction in central government expenditure in 2022 and 2023, accounting for 581 billion forint ($1.6 billion) and 500 billion forint respectively.
State investments to the tune of 1.15 trillion forint will be suspended for this year and next while lavish utility price subsidies will be restricted to households, according to the decrees published on Sunday.
Windfall taxes will be paid according to the following:
- Banks will pay a 10% levy on net revenue in 2022 and 8% in 2023 in two equal tranches; in 2022, the first tranche must be paid by Oct.
10, the second by Dec. 10
- Oil companies importing Russian crude — a reference to refiner Mol Nyrt. which was granted an EU exemption from the bloc’s oil embargo — will pay a 25% tax on the difference in price levels between Russian crude and Brent.
The tax must be paid by July 1 for 2022
- Telecommunication and retail companies will pay a progressive tax based on net sales that rises to 7% for revenue for telecom firms and 4.1% for retail for revenue in excess of 100 billion forint
- Airlines must pay a departure fee per traveler of 3,900 forint, or about 10 euros, for those flying to within the EU and most of Europe.
For those traveling further afield, the departure fee is 9,750 forint
- Financial transaction and excise taxes as well as a sprinkling of other smaller levies in the economy will also be raised or expanded, according to the decree
Hungarian assets were battered last week as confusion over the central bank’s monetary policy, plans to tax windfall profits and the outlook for the government to secure crucial EU funds spooked markets, sending the forint to near a record low against the euro.
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