Why do German companies invest in a country that continuously violates EU values? This is the question Die Zeit, a German liberal newspaper, raised. The author believes that BMW’s ongoing investment would be more beneficial if its attention shifted to Austria or Portugal, rather than Hungary.
The article cited the Sargentini report, which condemns Hungary, in its criticisms. Yet, despite this, German companies such as Daimler, Continental, Bosch, ThyssenKrupp, Schäffler and Siemens continues to invest in Hungary.
However, the author thinks these investments only serve to strengthen Orbán’s system.
BMW’s spokesperson told the newspaper that they did not choose Hungary based on political issues, but because of economic parameters including infrastructure, taxation, quality of the workforce and low wages. The company also noted that their plans regarding Hungary are long-term, therefore they will not make their decisions based on the current political climate.
They feel secure in Hungary because there is no serious political entity that would lead Hungary out of the European Union. They also claimed that the company wouldn’t receive EU subsidies for building the factory in Debrecen.
Earlier this year, Süddeutsche Zeitung also criticized the strong presence of German carmakers in Hungary, claiming that the German car industry shouldn’t let Orbán take advantage of them.
The other side of the coin: Hungary acts as a tax haven
The Hungarian government spent around HUF 300 billion (almost EU 1 billion) in support of international companies. Just this May-Jun alone the country provided 10.7 billion in financial aid to the world’s wealthiest companies.
With such drastic numbers, Hungary stands out among the other EU nations. According to a KPMG study, the country spends 66 percent of its budget on foreign multinational enterprises, while Poland spends just nine percent.
However, the Hungarian state doesn’t just provide financial aid but also offers tax benefits. Officially, it is nine percent – which is already the lowest rate in the EU – but according to the calculation of mfor.hu, the effective tax rate (the most important number for investors) is around five percent. The newspaper asserts that with this level of taxation Hungary could enlist.
Featured Image: The Mercedes-Benz plant in Kecskemét; Via: Kontakt Magazin