Tax reform in Hungary: small businesses up in arms

A fast-track tax reform is causing outrage in Hungary. The conditions of the flat-rate tax for low-taxed companies, Kata for short, will be tightened from September in such a way that the majority of the approximately 450,000 people affected will no longer fulfil them and will have to pay higher taxes. The government cited tax avoidance as the reason for its move. The national press is not convinced.

Open/close all quotes
Mandiner (HU) /

A glaring contradiction

The government is acting contrary to its own principles, writes the online editor-in-chief of the pro-government Mandiner, Gellért Rajcsányi:

“I am convinced that the Kata business taxation - similar to the generally low, flat-rate income tax - contributed massively to the strengthening and expansion of the middle class in the 2010s, and above all to the rapid rise of the stratum of young, professional service providers: career entrants or those in the first phase of their careers, which was also in line with the implementation of Fidesz's basic social philosophy. ... Now most [of those affected] will probably only be able continue their work with more complicated and higher taxation.”

hvg (HU) /

Big business is spared?

The government is burdening small businesses instead of supporting the global minimum tax, hvg criticises:

“Although Viktor Orbán has eradicated the term austerity from his own vocabulary and that of his subordinates, it will not be easy to present a tax hike that affects hundreds of thousands of entrepreneurs as anything other than that. Because this is what is happening with the restructuring of the flat tax on small businesses, commonly known as the kata. It's a peculiar move coming from the 'government of tax cuts', as Foreign Minister Péter Szijjártó called it. Concurrently, the government has vetoed the increase of tax burdens on large corporations to a global minimum.”

Népszava (HU) /

Bullying tactics

This measure targets independent livelihoods and especially intellectuals, Népszava speculates:

“[This decision] can be seen as symbolic: the first step of this 'government of tax reduction' - after raising its own salaries, of course - was to push through a drastic tax hike. But the situation is in fact worse than that: everyone would have been better off if the government had simply increased the Kata tax rate. Apparently, that was not the aim though. Instead, it was to make this as painful as possible - especially for people in intellectual professions who presumably don't vote for the right. And everyone whose livelihood has so far not depended directly on the government, from bicycle couriers to electricians.”