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Is Hungary the New Tax Haven for International Companies?

2018.07.06.

According to a newly released study by K-Monitor, the Hungarian government has spent around HUF 300 billion (almost EU 1 billion) in support of international companies. Just in this May-Jun period alone, the country has provided 10.7 billion financial aid to the world’s wealthiest companies.

Despite the harsh rhetoric used against multinational companies back in 2010-2014, the Fidesz government now encourages foreign investors by offering substantial financial initiatives. During the Socialist era in 2004-2010 Hungary provided 129 billion in support to such companies; meanwhile, in the last eight years, international companies have almost doubled their state revenues.

The government’s fundamental goal was to promote job creation, reflecting their election promise to create 1 million jobs in ten years. Job creation has succeeded at such a rate that the economy now suffers from a shortage of workers.

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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.

Source: KPMG/Prognos (2016)/Support to large enterprises Final Report Work Package 4

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 as a tax haven.

Via: K-monitor/mfor.hu/Mandiner.hu