In Praise of Multinationals (and Their tax Dollars)

Two issues after we looked at U.S. investments in Hungary (the biggest suppliers of foreign direct investment from outside the European Union), we report on those from Germany, still the largest single investor in this country.

Between them, these two special reports underline how important foreign multinationals, in particular, are to this most open of economies.  

It was the Habsburg-era statesman Klemens, Fürst von Metternich (who promoted the concept of the “balance of power” in Europe, and a policy of “divide and conquer” within the Empire) who coined the phrase “When France sneezes, Europe catches a cold”. Over time, America replaced France, and the accuracy of that statement was proved by the sub-prime crisis that first began in the United States in 2007, before expanding into a near-global recession. For Hungary, Germany could well replace America.  

But that is the unavoidable downside of being a small trading nation. Size always matters; just think of Hungary’s third biggest trade partner: China. No wonder Hungary looks on askance at the prospect of American and Chinese or American and European trade wars.  

But amid all the fabulous facts and figures you will find in this issue, the crucial detail of how much has been invested, by whom and when, one figure in particular stuck out for me. Our interview on Page 13 with Josip Niksic, CFO at Mercedes-Benz Manufacturing Hungary Kft., includes the following quote: “As a business, and an employer Mercedes-Benz paid a total of EUR 23 million in taxes and contributions in 2017 to the Hungarian state and the local government of Kecskemét.”  

In the grand scheme of things, EUR 23 million is not a huge sum of money, but at just shy of HUF 7.5 billion (at least at the time of writing), neither is it an amount to be sniffed at.

There was a time here when nationalist politicians (usually of the right, but never exclusively so) would routinely berate multinationals for profit repatriation, for taking money out of the country. It happens, it is what multinationals do everywhere. I did not hear any Hungarian MPs complaining when MOL received more than HUF 17 billion in dividends from its Balkan subsidiary INA earlier this month, though given the poor relations between the Croat government and the management of MOL, I suspect Croatian MPs were less enamored with the idea.  

Multinationals do not just repatriate profits, though. They also invest in terms of infrastructure, in terms of jobs creation and, as the German-Hungarian Chamber of Industry and Commerce has pointed out through its latest survey, they increasingly also want to reinvest in Hungary.

And on top of all that, they also pay their taxes. Auto industry players probably do so more happily than their peers in the banking or telecom sectors, both of whom are hit by sectoral taxes that bodies as disparate as the European Union and the American Chamber of Commerce in Hungary has suggested should be removed. The government thus far appears unmoved by such arguments, and while the bank levy has been lowered, Minister of Finance Mihály Varga said earlier this year there are no plans to repeal it.  

But for all the dark mumblings in pro-government newspapers of international retailers, for example, “cooking their books”, the point is that, happily or not, these multinationals pay their taxes. And those taxes benefit all Hungarians. It is yet another reason to be grateful for the presence of these businesses in Hungary.   

Robin Marshall

Editor-in-chief