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President Novák Signs Controversial Small Business Tax Law

Hungary Today 2022.07.19.

On Monday, President Katalin Novák signed the amendments to the tax for small business owners (KATA) into law, a controversial legislation that prompted numerous protests in Budapest in the past week.

The government had been hinting for months that it will change the KATA tax, which is currently used in Hungary by more than 400,000 sole proprietors and those who are self-employed, as it in many respects offers significantly better tax conditions than other options.

The government ultimately presented a change to the tax law on July 11th, and the parliament hastily decided to accept it the next day under an exceptional procedure. The government argued that the KATA amendments are necessary in order to reduce tax evasion and to stop many companies that use it as a form of hidden employment.

The decision, however, sparked serious outrage, with a number of NGOs and professional organizations criticizing the move, stressing that the changes contained in the amendment, instead of fine-tuning the law to close loopholes used by tax evaders, are essentially eliminating the tax form for most of its current users, including honest taxpaying Hungarians. Another source of criticism came from the fact that the new legislation was adopted in a single day without any prior consultation with the public.

Protesters Rally Against Self-employment Tax Changes
Protesters Rally Against Self-employment Tax Changes

Representatives of several affected sectors - creative industry professionals, hairdressers, film-makers - turned up at Parliament to protest the change in the law, with food delivery workers, for example, standing together in a group.Continue reading

In addition, the new rules will come into effect as soon as September 1st, forcing those concerned  to seek out the help of accountants and go to the tax office to take care of paperwork in the coming weeks, without providing them with the necessary time to prepare for such changes.

The new regulation has generated opposition, in Budapest and other Hungarian cities, smaller protests against it have been held daily.

President Novák signs the amendment

In a statement on Moday, President Katalin Novák said she had found no reason to refer the law to the Constitutional Court, and “the legislator’s intent is hardly disputable.”

At the same time, “the outrage is palpable,” and many have difficulties in adapting swiftly to the new situation, the president emphasized.

I can understand they have questions. It would have been better to decide on the amendments after substantive consultation with the interested parties,”

she added.

“I have talked to the Prime Minister and the cabinet, and obtained a promise that the detailed regulations will provide answers to legitimate questions,” Katalin Novák noted.

In these extraordinary times, Hungary’s security is based on budgetary stability. “Cooperation, mutual responsibility, and understanding will help us through the worst of it. That is the only way to stay standing,” Novák stressed.

Featured image via Zsolt Szigetváry/MTI

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