The ways and thoughts behind the Hungarian economic policy are baffling. It is hard to understand why almost four years after introducing the special taxes, which contributed a lot for budget savings but on the other hand destroyed trust, it is still not possible to give investors what they really need besides markets, investment contributions and financing: a certain basic trust and predictability. When about four years ago the special taxes struck the financial institutions, energy companies, telecommunication companies and retailers like lightning from the sky, there was great dismay. This not-so-guest-friendly treatment was unusual for the impacted. In some cases they also had to make retrospective payments. After the first waves of scare and anger receded, the affected companies even realised the necessity of the taxes to some extent. Officially they were still strictly opposed – they owed this to their shareholders – but internally they began to accept the government measures as some unpleasant but necessary burden. Especially since they realised that without their support Hungary might have experienced the same fate as Greece.
Maybe they also understood that the government did not really have other sources for financing the deficit to be able to meet the Maastricht conditions, given the intransigent attitude of Brussels. Besides all the understanding, they could also remember the many fat years they had spent in this country, especially the banks, and this allowed them to finance these new taxes. In addition, the new taxes came with a promise that they would be temporary, and new measures would be expected in about two years.
However, since by the middle of the second Orbán government legislation period these special taxes were revived, these expectations did not work out. A whole lot of cable, transaction, Robin Hood and further taxes and a reduction of living costs induced by the authorities caused further disappointment. While the last one was rather a tool for the electoral campaign, the continuation of the other special taxes happened due to budgetary reasons, which are apparently still valid today, since all these new taxes are still diligently raised from time to time.
Special taxes are permanent guests
In the meantime it looks like the impacted have somehow dealt with the special taxes, which seem to be permanent (and the state treasury also got used to earning these incomes), and now they are trying to build a further future in Hungary with more modest profit expectations. Although it’s not too probable that the government is going to impose any further taxes on the companies impacted by the special taxes and the state budget shows a much more consolidated view than in 2010, it is sure that these companies will not regain their basic trust easily. Regaining trust, however, would be urgently needed by the companies, since it would be necessary for reaching the security level to obtain the much-longed-for urgent investments.
So these investments are still iced for the moment, and only those ones are realised that are fundamental. The lending activity of the banks is surely a victim of this situation. For the real estate developers the so-called “plaza stop” is causing a shock that is paralysing the industry. In this situation it would be the state’s turn to take the example of the “good companies”, with which they have formed strategic collaborations, and start negotiating with the “bad” or “less favourable” branches as well and create clear framework conditions with them too.
It’s a nice idea but we cannot see much of it happening in practice yet. The impacted companies that belong to the “less favourable branches” all report that now, three months after the elections, they did not even manage to meet a partner from the state to negotiate with in order to build up the new ground for conversation.
Anxiety supported by the state
Considering that not much has changed after the elections and thanks to the rectified state finances, a period of rest and prosperity should follow in principle, a phase where everyone could get a bigger piece of the pie. However, some decision makers on the government side prefer to take caution and wait out. Wait for what actually?
There is one thing that the responsible people are still very good at, namely disturbing the rebuilding of basic trust with such measures as the financially unexplainable RTL Klub-tax. Even though this tax targets specifically an unfavourable private TV channel only, it is still causing devastating collateral damage.
It’s not only that almost the whole media branch is considering this move as an attack on their freedom and organises its defence accordingly, but important investors might also get the feeling seeing this tax that was introduced for a specific branch – flashback from 2010 – that they could also become the victim of a new tax or any other kind of negative government measure any time.
We might even get the feeling that stirring up this awareness happens by intention, and the government is not interested in clearing relations and creating a predictable environment for investors, and this “making-things-float-artificially” is part of the system.
System or not system?
However, it could be that we are just thinking too much. Maybe all these symptoms are just a consequence of a system that is lacking order and coordination, and where one hand does not know what the other is doing. In a country where the government would like to install a memorial on the occupation in the Holocaust memorial year that opposes in concept the memorial year, it is easily possible that while one hand is petting a “good” investor, the other one is hitting the “bad” energy suppliers, and at the end the light in the office of the “good one” will go out due to missed investments by the “bad one”.
For the benefit of the country, and also for its puzzled friends, it would be quite nice to have some more consistency. The present two-thirds majority and the clear hierarchies could be made of good use in this aim.
