Taxes, Morale and Eastern Vaccinations
In the 20-plus years I have been living in and reporting on Hungary, the tax morale, the willingness of people to pay their taxes, has improved dramatically. No one really “likes” to pay taxes, of course, and there is nothing new in that. The Pharisees and Herodians were trying to trap Jesus with his own words when they asked the question that prompted that famous “Render unto Caesar that which is Caesar’s” remark, but the very question itself is based on the idea that paying taxes to any central authority is never a totally happy experience.
But the truth is that paying your dues indicates you have bought into the collective; you pay in to finance the state and benefit from its services, whether that is the army, the police, the fire service, healthcare or whatever. That was the problem with post-communist Hungary; for so long people had tried their best to work around an unwelcome system imposed upon them. I vividly remember a conversation with a Fidesz secretary of state responsible for tax affairs who complained that rather than reporting a neighbor who was obviously cheating on his taxes, people would instead regard that person as some kind of Robin Hood hero and ask how he was doing it.
We have moved far beyond that now. The tax debt has reduced even as the amount taken in has increased, a sure sign of a whitening economy. People are happier to pay their taxes, in part because there are fewer of them to pay, as our story on page 16 explains. There is still a way to go along that path; employers in particular would like to see their payroll contributions reduced to make the country more competitive, the business tax is generally unpopular and red tape still abounds.
One recent reform is puzzling, however. Fidesz originally introduced the simplified tax system for entrepreneurs known as KATA to encourage more people to pay into the system rather than work “black.” From this year they have sought to close a loophole where it says employers avoid payroll taxes by engaging contractors rather than employing staff. But as our story on page 13 suggests, that won’t bring in much money, relatively, and does seem to risk an increase of cash-in-hand payments. It has also upset all sorts of professional associations, from doctors’ groups, to architects, to waiters.
Admittedly, the latter have other concerns on their minds right now, like when the economy might open and they can get back to work, before they can even begin to “render unto Caesar.” Unusually for us, our cover photo is not linked directly to any one story, but it is connected to one of the most important questions facing the Hungarian economy today, even on the back of surprisingly positive Q4 GDP figures.
The President of Hungary, its prime minister and foreign minister, but also senior infectious disease experts and medical chiefs, as well as leading economists, have all made the point that the speed of opening up and the subsequent economic recovery will be linked, at least in part, to the vaccination rollout. And that is entirely linked to how many vaccines Hungary can secure. Given the slow drip feed of EU-sourced vaccines, Hungary has used its Eastern connections to secure vaccines from outside the bloc. You can see why there is the temptation to rely on Russia and count on China.
This article was first published in the Budapest Business Journal print issue of February 26, 2021.
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