Hungarian Prime Minister Viktor Orbán has announced that the local business tax that municipal governments collect from small and medium-size enterprises and entrepreneurs will be cut in half starting January 1, 2021.
The tax cut is part of a new package of coronavirus mitigation and support measures announced by Orbán in a video shared on his Facebook page December 19. The package also includes an extended moratorium on business and household loan repayments and new wage subsidies.
The local business tax is an important source of revenue for local governments. Federal aid will be available to municipalities with less than 25,000 inhabitants, Orbán said, according to a December 19 government release. Larger municipalities will have their financial situation reviewed on a case-by-case basis.
The decision provoked pushback from opposition leaders, including liberal Budapest Mayor Gergely Karácsony, who wrote on his Facebook page that cutting the business tax only deepens the economic crisis.
Karácsony has clashed with Orbán’s Fidesz-controlled government over municipal sovereignty, including Orbán’s early December decree banning local governments from raising municipal taxes, introducing new taxes, or abolishing existing tax breaks and exemptions.
Orbán’s latest measures extend the moratorium on loan repayments until July 1, 2021. They also provide businesses that were forced to temporarily close because of coronavirus mitigation orders — mostly in the tourism and restaurant industries — with exemptions from social contributions and wage subsidies equal to two-thirds payroll cost for December and January 2021.
Hungary entered a partial lockdown November 9. The country closed secondary schools, universities, and restaurants; imposed an extended nighttime curfew; and banned all gatherings.
For families with children or expecting a child, the new measures offer a discounted home renovation loan of up to HUF 6 million (roughly $20,500) with an interest rate of up to 3 percent, according to the release. When the renovation is completed, the loan principal will be reduced with a HUF 3 million nonrefundable grant, Orbán said.
Over the last year, Hungary has issued about HUF 4 trillion in tax relief for individuals and employers in sectors disproportionately affected by the crisis, including tourism and hospitality. However, in April the government announced it would tax banks and multinational corporations to pay for nearly HUF 2 trillion in economic relief. The government also provided social contribution relief, slashed VAT on some products, cut small business taxes, and introduced tax exemptions for distillers of the national drink and companies that reinvest profits in Hungary.