BUDAPEST, May 26 (Xinhua) — The Hungarian government said Thursday it would impose a total of 800 billion forints (2.2 billion U.S. dollars) of windfall taxes, mostly on the financial and energy sectors, to curb inflation and finance rising defense costs.
The new measures will apply for 2022 and 2023. The special taxes would be levied over eight sectors that include banking, insurance, energy, retail, telecommunications, airlines, and pharmaceutical distribution. An advertising tax would also return from January 2023.
“The measures also guarantee that this year’s 4.9 percent budget deficit target will be met,” Gergely Gulyas, head of the Prime Minister’s office, said at the press conference.
For 2023, the government is expecting an inflation rate of 5.2 percent, a deficit target of 3.5 percent, and a GDP growth of 4.1 percent, according to Gulyas.
On Wednesday evening, Prime Minister Viktor Orban announced the creation of a public utility cut fund and a defense fund. He said banks, insurance companies, large distribution chains, energy and trading companies, telecommunications companies and airlines would be obliged to give most of their extra profits to these funds.
The new funds will finance the government’s household price cap program and development projects for the military, Orban added.
As a separate measure, Gulyas said the government will from Friday forbid foreign drivers to fill up on cheap gas and diesel in Hungary.
Fuel at Hungarian pumps is limited to 480 forints per liter, about half the equivalent price in neighboring countries.
The public is generally in favor of the announced measures, reported local pollster Szazadveg. A total of 79 percent of respondents in their recent survey expressed support for the government’s decision to levy the extra profit taxes on companies making extra profits to finance its public utility cuts program.
However, the financial markets reacted negatively. The Budapest Stock Exchange plummeted, losing 5.5 percent on Thursday, mostly dragged down by the shares of banks and energy companies that were mostly hit by the new levy.
Hungarian currency forint also fell sharply against the euro and U.S. dollar, according to central bank figures.
The introduction of austerity measures by the Orban government was just a question of time, Gabor Gyori, an analyst at Policy Solutions in Budapest, told Xinhua.
“Orban himself did not rule out that austerity measures would be introduced soon following the elections,” Gyori recalled. “Now it is obvious that he wants to make the companies support its costs.”
The analyst also said that although it was too soon to tell, it was most probable that the concerned companies would reflect at least part of their new burden in their prices. (1 U.S. dollar = 366.85 forints)