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The government has submitted a bill on “special economic zones,” that enables tax revenues of investment projects costing at least HUF 5 billion to be redirected from the local councils to the county councils to achieve a more “balanced distribution.” The government claims the new regulation will help to restart the economy and create jobs while critics of the bill believe the decision is politically motivated and fear this is simply yet another attempt from Fidesz to punish opposition-led municipalities and transfer their income to Fidesz-led county councils.

The government has submitted a bill on special economic zones to boost the rapid and effective implementation of major investment projects and regional infrastructure development projects, the Prime Minister’s office said on Wednesday.

The projects must have a value of at least 5 billion forints (EUR 14.2 m) and an impact on the economy and employment, not only on a local, but on a regional level.

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According to the bill, as development projects in these zones could affect the entire county, it is fairer if several localities benefit from the related tax revenue.

In addition to promoting investment, the bill enables a more balanced distribution of resources within counties, the office said.

Certain tax revenues from special economic zones can be used by the county governments for financing regional development and supporting towns and villages.

The change will not affect the current ratio of local and central taxes, and will not apply to investments in Budapest, districts of the capital, and cities of county seat status, adding that the central government will not draw away any resources from the municipalities.

The government’s economic policy aims to enable everyone to work, and the designation of “special economic zones” will contribute to the restart of the economy, to job creation and preservation, the PM’s office said.

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This is not the first time the Orbán administration has set a special economic zone during the state-of-emergency. Recently, the town of Göd in Pest county where Samsung is building one of Europe’s biggest battery factories, was rendered such territory by a decree. Due to the lost revenues Göd’s opposition (Momentum) Mayor Csaba Balogh called the decision a “death sentence” for the town.

Perhaps the most significant difference between the previous decree and the bill, is that the latter draws the line at an investment value of 5 billion forints compared to the previous 100 billion (EUR 284 m). This means that from now on, the government will be able to apply this procedure to many more municipalities than before. According to critiques of the regulation, this will enable the political leadership to take away financial resources from opposition-led towns and redirect them to local councils where Fidesz has the majority.

The proposal also requires municipalities to first use the incoming business tax expenditure on public transportation, and the remaining on social benefits.

During his regular news briefing on Thursday, Head of the Prime Minister’s Office Gergely Gulyás, said that many misconceptions are circulating in the news.

The minister said previously established investments would not be affected by the redirection of the business tax, nor would cities with county rights (cities with expansive administrative rights). The bill will mainly affect smaller towns and will aim to get more places close to the investments to receive the benefits, he added.

Featured photo illustration by Zoltán Balogh/MTI

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