Economic Sustainability
#30Key Findings
Hungary is the SGI 2024’s lowest scorer (rank 30) in the category of economic sustainability.
Circularity economy strategies are underdeveloped and fragmented. Hungary’s energy policies focus on security, reducing fossil fuel use and affordable prices, with a goal of carbon neutrality by 2050, though progress toward this goal has been slow.
The labor market in Hungary is flexible, with a high employment rate above 80%. However, ideological policies have led to persistent gender pay gaps, anti-migration policies and poor labor-market integration among the Roma population. Oligarchs benefit from weak financial-market oversight.
The flat income tax and high VAT disproportionately benefit high-income earners. Corporate taxes are low, but companies struggle with frequent tax policy changes and policies favoring oligarchs connected to the government. While debt has fallen in recent rears, budget deficits remain high.
Circularity economy strategies are underdeveloped and fragmented. Hungary’s energy policies focus on security, reducing fossil fuel use and affordable prices, with a goal of carbon neutrality by 2050, though progress toward this goal has been slow.
The labor market in Hungary is flexible, with a high employment rate above 80%. However, ideological policies have led to persistent gender pay gaps, anti-migration policies and poor labor-market integration among the Roma population. Oligarchs benefit from weak financial-market oversight.
The flat income tax and high VAT disproportionately benefit high-income earners. Corporate taxes are low, but companies struggle with frequent tax policy changes and policies favoring oligarchs connected to the government. While debt has fallen in recent rears, budget deficits remain high.
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How committed is the government to driving the transition toward a circular economy?
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The government is clearly committed to transitioning to a circular economy.
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The government is largely committed to transitioning to a circular economy.
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The government is somewhat committed to transitioning to a circular economy.
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1
The government is not at all committed to transitioning to a circular economy.
Hungary’s circularity rate of 8.7% is well below the EU average of 12.8% (ETC 2022:5), indicating that the circular economy is still in its early stages of development (Gulyas 2022:4). Hungary’s circular economy strategy is embedded in the Environmental and Energy Efficiency Operational Program Plus within the European structural funds. This strategy predominantly targets small- and medium-sized enterprises, focusing on key sectors like biomass, food, construction and plastics. The goals for 2040 include doubling resource productivity, increasing circular material use and boosting cyclical jobs by 30%. The Circular Economy Platform, established in 2018 and initiated by the Business Council for Sustainable Development, which comprises 130 leading companies operating in Hungary, facilitates collaboration between businesses, government and researchers. In 2023, a Circular Economy Academy was founded. Additionally, a new waste management authority was set up in 2021, aimed at transforming the waste management market by introducing a concession system (Gulyas 2022: 3). The national concession was awarded to the partially state-owned oil and energy company MOL, effective as of 2023 (MOL Group 2022). An institutional upgrade includes a new unit in the newly established Ministry of the Economy, with a state secretary exclusively responsible for the circular economy. Single-use plastic was banned in 2021, and a new deposit-based collection system was announced for most recyclable plastic food packaging in 2023, effective from January 2024 (Hungary Today 2023). Challenges remain with regard to policy implementation, with leading international organizations recommending that Hungary strengthen its framework for waste management. Among the topics of criticism have been the recentralization of waste-related governance, financial problems especially at the local level, and suboptimal cross-ministerial collaboration. There is a need to consolidate the relevant plans and documents into a national strategy for the circular economy (OECD 2023:12), as they are currently dispersed across various policy fields and legal and operational sources. The implementation of the policies and measures mentioned in these documents is relatively weak, and better involvement of stakeholders, such as NGOs and academic institutions, is necessary. Although several steps in this direction have been taken, the reform process in this field has only just begun.
Moreover, the government’s commitment to the circular economy is questioned by Prime Minister Orbán’s rhetoric, as he recently expressed support for “green energy” but rejected “green ideology” at a party congress (Magyar Nemzet 2023).
Citations:
OECD. 2023. “Towards a National Circular Economy Strategy for Hungary.” Paris: OECD Publishing.
Gulyas, O. 2022. Eco-Innovation Country Profile 2022: Hungary. Brussels: BSoG.
European Topic Centre on Circular Economy and Resource Use (ETC). 2022. “ETC CE Report 2022/5 – Hungary, Circular Economy Country Profile – Hungary.” https://www.eionet.europa.eu/etcs/etc-ce/products/etc-ce-products/etc-ce-report-5-2022-country-profiles-on-circular-economy/hungary-ce-country-profile-2022_for-publication.pdf
Magyar Nemzet. 2023. “PM Orban: Yes to Green Energy, No to Green Ideology.” 24 November. https://magyarnemzet.hu/english/2023/11/pm-orban-yes-to-green-energy-no-to-green-ideology
MOL Group. 2022. “MOL Wins Concession for Waste Management Services.” 15 July. https://molgroup.info/en/investor-relations/investor-news/mol-wins-concession-for-waste-management-services
Hungary Today. 2023. “Mandatory Bottle Return System to be Introduced Next Year.” 6 October. https://hungarytoday.hu/mandatory-bottle-return-system-to-be-introduced-next-year/
Moreover, the government’s commitment to the circular economy is questioned by Prime Minister Orbán’s rhetoric, as he recently expressed support for “green energy” but rejected “green ideology” at a party congress (Magyar Nemzet 2023).
Citations:
OECD. 2023. “Towards a National Circular Economy Strategy for Hungary.” Paris: OECD Publishing.
Gulyas, O. 2022. Eco-Innovation Country Profile 2022: Hungary. Brussels: BSoG.
European Topic Centre on Circular Economy and Resource Use (ETC). 2022. “ETC CE Report 2022/5 – Hungary, Circular Economy Country Profile – Hungary.” https://www.eionet.europa.eu/etcs/etc-ce/products/etc-ce-products/etc-ce-report-5-2022-country-profiles-on-circular-economy/hungary-ce-country-profile-2022_for-publication.pdf
Magyar Nemzet. 2023. “PM Orban: Yes to Green Energy, No to Green Ideology.” 24 November. https://magyarnemzet.hu/english/2023/11/pm-orban-yes-to-green-energy-no-to-green-ideology
MOL Group. 2022. “MOL Wins Concession for Waste Management Services.” 15 July. https://molgroup.info/en/investor-relations/investor-news/mol-wins-concession-for-waste-management-services
Hungary Today. 2023. “Mandatory Bottle Return System to be Introduced Next Year.” 6 October. https://hungarytoday.hu/mandatory-bottle-return-system-to-be-introduced-next-year/
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How committed is the government to updating and protecting critical infrastructure?
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The government is clearly committed to updating basic technical infrastructure.
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The government is largely committed to updating basic technical infrastructure.
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The government is somewhat committed to updating basic technical infrastructure.
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The government is not at all committed to updating basic technical infrastructure.
The National Directorate General for Disaster Management of the Ministry of the Interior oversees disaster management, coordinating activities of other authorities to prevent emergencies. Hungary’s National Security Strategy 2020 addresses several issues concerning foreign liabilities. In this context, an FDI screening mechanism oversees the impact of international companies on national security. Administratively, agencies such as the National Directorate General for Disaster Management and the National Cyber Security Center are responsible for conducting risk assessments and implementing any necessary countermeasures. Especially in the cybersphere, significant developments have occurred. The Recovery and Resilience Plan strongly emphasizes investments in the digital transition, with almost 30% of resources dedicated to such measures. Issues addressed include the availability of digital equipment in primary, vocational and higher education settings, as well as the digital skills deemed necessary to protect critical infrastructure. Part of the educational effort is focused on raising awareness of problems. The digitalization of the public administration and sectoral improvements in the health, transport and energy sectors are also included.
In the energy sector, progress in decarbonizing energy systems has been notable, especially with regard to the decentralization induced by growing solar energy capacities. This progress reduces dependency on the Paks nuclear energy plant and energy imports from Russia. However, it is projected that even by 2033, the Hungarian energy system will largely rely on nuclear power, with this accounting for an estimated 52% of total energy production (Magyar Nemzet 2023).
Moreover, roads and railroads are in critical condition, with the latter suffering from speed limits on most of its main routes, affecting both passenger transport and cargo (Hungarian Conservative, 2023). A new Ministry of Construction and Transport was established to facilitate and expedite the coordination of infrastructure development projects. However, its operation has led to a number of conflicts between operators and authorities. Nevertheless, parties agreed on a new fare system in late 2023, which lowered ticket prices and improved interoperability (Daily News Hungary 2023).
Citations:
Magyar Nemzet. 2023. “PM Orban: Yes to Green Energy, No to Green Ideology.” 24 November. https://magyarnemzet.hu/english/2023/11/pm-orban-yes-to-green-energy-no-to-green-ideology
Daily news Hungary. 2023. “Complete Overhaul of Hungarian Public Transport Tickets Coming, Extending Free Travel.” 10 December. https://dailynewshungary.com/complete-overhaul-of-hungarian-public-transport-tickets-coming-extending-free-travel/
Hungarian Conservative. 2023. “Men, the State and Rails – How Hungarian Trains are on the Verge of Derailing.” https://www.hungarianconservative.com/articles/opinion/hungarian_railways_obsolete_underfunded_lack-of-vision_eu-funds_internal_conflicts/
In the energy sector, progress in decarbonizing energy systems has been notable, especially with regard to the decentralization induced by growing solar energy capacities. This progress reduces dependency on the Paks nuclear energy plant and energy imports from Russia. However, it is projected that even by 2033, the Hungarian energy system will largely rely on nuclear power, with this accounting for an estimated 52% of total energy production (Magyar Nemzet 2023).
Moreover, roads and railroads are in critical condition, with the latter suffering from speed limits on most of its main routes, affecting both passenger transport and cargo (Hungarian Conservative, 2023). A new Ministry of Construction and Transport was established to facilitate and expedite the coordination of infrastructure development projects. However, its operation has led to a number of conflicts between operators and authorities. Nevertheless, parties agreed on a new fare system in late 2023, which lowered ticket prices and improved interoperability (Daily News Hungary 2023).
Citations:
Magyar Nemzet. 2023. “PM Orban: Yes to Green Energy, No to Green Ideology.” 24 November. https://magyarnemzet.hu/english/2023/11/pm-orban-yes-to-green-energy-no-to-green-ideology
Daily news Hungary. 2023. “Complete Overhaul of Hungarian Public Transport Tickets Coming, Extending Free Travel.” 10 December. https://dailynewshungary.com/complete-overhaul-of-hungarian-public-transport-tickets-coming-extending-free-travel/
Hungarian Conservative. 2023. “Men, the State and Rails – How Hungarian Trains are on the Verge of Derailing.” https://www.hungarianconservative.com/articles/opinion/hungarian_railways_obsolete_underfunded_lack-of-vision_eu-funds_internal_conflicts/
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How committed is the government to fully decarbonizing the energy system by 2050?
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The government is clearly committed to transitioning to a decarbonized energy system.
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The government is largely committed to transitioning to a decarbonized energy system.
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The government is somewhat committed to transitioning to a decarbonized energy system.
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The government is not at all committed to transitioning to a decarbonized energy system.
Hungary’s climate and energy policies prioritize energy security, the reduction of fossil fuel use and affordable energy prices. The Climate Protection Law of 2020 created a legal obligation for these objectives. Implementation is based on the National Energy and Climate Plan (NECP) 2020 and the National Clean Development Strategy (NCDS) 2021. Given the lack of an environmental ministry, the Ministry of Technology and Industry was originally the implementing authority. After the 2022 parliamentary election, the government established a Ministry for Energy, where a state secretary is now responsible for climate-change issues – a clear upgrade compared to the previous governance structure. Societal input is organized through the Environment Council, which comprises three groups: environmental organizations, trade and economic interest representatives, and academic representatives appointed by the president of the Hungarian Academy of Sciences. Consultations with civil society organizations took place during the creation of the plans, but a lack of documentation makes it unclear whether their suggestions impacted the texts.
Hungary’s carbon neutrality goal is set for 2050, with an interim target of achieving a 90% low-carbon electricity mix by 2030. These targets were updated as part of the European Green Deal and in response to the war in Ukraine. The European Commission’s assessment indicated that the plan is “not entirely convincing on how these targets will be reached” (European Commission 2023:4), criticizing the lack of detail regarding the scope, timing, financing sources and expected impacts of new measures. The first setback occurred in 2022 when the government permitted increased domestic production of oil and gas, prompted by Russia’s invasion of Ukraine and rising energy prices. Hungary’s energy sector decarbonization relies primarily on a solar strategy that is beginning to gain traction, but is hindered by grid shortcomings. The other main pillar is nuclear energy production in the Paks I and II nuclear power plants. Hungary has the third-highest share of electricity generation from nuclear sources among International Energy Agency (IEA) member countries, with the government placing its strongest emphasis here.
In 2023, the government also announced the construction of three new combined cycle gas turbine (CCGT) power plants to meet increasing industrial demand (Daily News Hungary 2023). A weak point in the original strategy appears to be the absence of instruments to enhance energy efficiency and the dispersal of regulatory competencies across multiple government branches (IEA 2022: 12). The revised version of the strategy seems to address these issues more effectively.
Citations:
Daily News Hungary. 2023. “This is where Hungary will build its new gas power plants.” 15 March. https://dailynewshungary.com/hungary-has-decided-where-to-build-its-new-gas-power-plants/
International Energy Agency (IEA). 2022. “Hungary 2022 Energy Policy Review.” https://iea.blob.core.windows.net/assets/9f137e48-13e4-4aab-b13a-dcc90adf7e38/Hungary2022.pdf
European Commission. 2023. “Assessment of the Draft Updated National Energy and Climate Plan of Hungary.” 18.12.2023 SWD(2023) 916 final. https://commission.europa.eu/system/files/2023-12/SWD_Assessment_draft_updated_NECP_Hungary_2023.pdf
Hungary’s carbon neutrality goal is set for 2050, with an interim target of achieving a 90% low-carbon electricity mix by 2030. These targets were updated as part of the European Green Deal and in response to the war in Ukraine. The European Commission’s assessment indicated that the plan is “not entirely convincing on how these targets will be reached” (European Commission 2023:4), criticizing the lack of detail regarding the scope, timing, financing sources and expected impacts of new measures. The first setback occurred in 2022 when the government permitted increased domestic production of oil and gas, prompted by Russia’s invasion of Ukraine and rising energy prices. Hungary’s energy sector decarbonization relies primarily on a solar strategy that is beginning to gain traction, but is hindered by grid shortcomings. The other main pillar is nuclear energy production in the Paks I and II nuclear power plants. Hungary has the third-highest share of electricity generation from nuclear sources among International Energy Agency (IEA) member countries, with the government placing its strongest emphasis here.
In 2023, the government also announced the construction of three new combined cycle gas turbine (CCGT) power plants to meet increasing industrial demand (Daily News Hungary 2023). A weak point in the original strategy appears to be the absence of instruments to enhance energy efficiency and the dispersal of regulatory competencies across multiple government branches (IEA 2022: 12). The revised version of the strategy seems to address these issues more effectively.
Citations:
Daily News Hungary. 2023. “This is where Hungary will build its new gas power plants.” 15 March. https://dailynewshungary.com/hungary-has-decided-where-to-build-its-new-gas-power-plants/
International Energy Agency (IEA). 2022. “Hungary 2022 Energy Policy Review.” https://iea.blob.core.windows.net/assets/9f137e48-13e4-4aab-b13a-dcc90adf7e38/Hungary2022.pdf
European Commission. 2023. “Assessment of the Draft Updated National Energy and Climate Plan of Hungary.” 18.12.2023 SWD(2023) 916 final. https://commission.europa.eu/system/files/2023-12/SWD_Assessment_draft_updated_NECP_Hungary_2023.pdf
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To what extent do existing labor market institutions support or hinder the transition to an adaptive labor market?
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Labor market institutions are fully aligned with the goal of an adaptable labor market.
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Labor market institutions are largely aligned with the goal of an adaptable labor market.
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Labor market institutions are only somewhat aligned with the goal of an adaptable labor market.
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Labor market institutions are not at all aligned with the goal of an adaptable labor market.
Hungary has a flexible labor market, and the unemployed are urged to take up jobs quickly, as unemployment benefits are low and short-term. Consequently, the employment rate, which is above 80%, is higher than the EU average. Incentives to be mobile are therefore high. More than 30% of employees work in the public sector, the highest such figure among International Labor Organization (ILO) countries (ILO 2022). This is in part due to public work programs designed to quickly reintegrate people into the labor market after unemployment. In this system, also called a “workfare regime” (Szombati 2021), incentives are relatively low, and push factors are rather high. Act LXXVII of 2013 on Adult Education regulates lifelong learning, aiming to establish vocational training programs for groups disadvantaged in the labor market, especially low-skilled adults, to improve their employability. In 2018, a new law colloquially dubbed the “Slave Law” extended the cap on annual overtime from 250 to 400 hours, provoking protests and international criticism (Karasz and Kingsley 2018). In 2019 and 2020, significant changes were introduced to adult training (VET Act Act LXXX of 2019) (European Commission 2023), lifting adult training out of the public education system. The pandemic created several hurdles to implementing the new program, and the transitional period is ongoing.
The aim is to finance all adult training fully or partly through government or EU funds. To date, the numbers are not entirely encouraging. Tax rebate instruments are available, and training grants for young parents are embedded in Hungarian family policy. However, the number of Hungarians using the programs is suboptimal; the country ranks in the lower third in the OECD comparison. In the EU comparison, the ratio of people aged 25 to 64 participating in adult training was 5.9% in 2021, compared to the 10.8% EU average (European Commission 2003a:63). Another issue is specific skills in the green transition. Labor shortages were reported in 31 occupations in this area (European Commission 2023a:14). During the pandemic, in 2020 and 2021, Hungary assisted companies by providing and extending wage cost subsidies by 90%. Wage subsidies for workers were provided, but were phased out after the pandemic. Several other instruments were also extended with the aim of stabilizing the labor market (NFSZ:4). Only public work schemes were reduced due to lockdowns. The programs reached around 360,000 persons in 2021, approximately 3% of the population, while programs addressing wages covered around 260,000 persons.
Citations:
European Commission. 2023. “Euridice Mobility Scoreboard Hungary.” https://eurydice.eacea.ec.europa.eu/national-education-systems/hungary/national-reforms-related-transversal-skills-and-employability
International Labor Organization (ILO). 2022. “Labor Market Policies for Inclusiveness. A Literature Review with a Gap Analysis.” https://www.ilo.org/static/english/intserv/working-papers/wp078/index.html
European Commission. 2023a. “European Economy, Country Report Hungary, Institutional Paper 241.” https://economy-finance.ec.europa.eu/system/files/2023-06/ip241_en.pdf
Karasz, P., and Kingsley, P. 2023. “What Is Hungary’s ‘Slave Law,’ and Why Has It Provoked Opposition?” The New York Times, December 22. https://www.nytimes.com/2018/12/22/world/europe/hungary-slave-law.html
NFSZ. “Az aktív foglalkoztatáspolitikai eszközök fontosabb adatai 2021-ben.”
Szombati, K. 2021. “The consolidation of authoritarian rule in rural Hungary: Workfare and the shift from punitive populist to illiberal paternalist poverty governance.” Europe-Asia Studies 73(9): 1703-1725.
The aim is to finance all adult training fully or partly through government or EU funds. To date, the numbers are not entirely encouraging. Tax rebate instruments are available, and training grants for young parents are embedded in Hungarian family policy. However, the number of Hungarians using the programs is suboptimal; the country ranks in the lower third in the OECD comparison. In the EU comparison, the ratio of people aged 25 to 64 participating in adult training was 5.9% in 2021, compared to the 10.8% EU average (European Commission 2003a:63). Another issue is specific skills in the green transition. Labor shortages were reported in 31 occupations in this area (European Commission 2023a:14). During the pandemic, in 2020 and 2021, Hungary assisted companies by providing and extending wage cost subsidies by 90%. Wage subsidies for workers were provided, but were phased out after the pandemic. Several other instruments were also extended with the aim of stabilizing the labor market (NFSZ:4). Only public work schemes were reduced due to lockdowns. The programs reached around 360,000 persons in 2021, approximately 3% of the population, while programs addressing wages covered around 260,000 persons.
Citations:
European Commission. 2023. “Euridice Mobility Scoreboard Hungary.” https://eurydice.eacea.ec.europa.eu/national-education-systems/hungary/national-reforms-related-transversal-skills-and-employability
International Labor Organization (ILO). 2022. “Labor Market Policies for Inclusiveness. A Literature Review with a Gap Analysis.” https://www.ilo.org/static/english/intserv/working-papers/wp078/index.html
European Commission. 2023a. “European Economy, Country Report Hungary, Institutional Paper 241.” https://economy-finance.ec.europa.eu/system/files/2023-06/ip241_en.pdf
Karasz, P., and Kingsley, P. 2023. “What Is Hungary’s ‘Slave Law,’ and Why Has It Provoked Opposition?” The New York Times, December 22. https://www.nytimes.com/2018/12/22/world/europe/hungary-slave-law.html
NFSZ. “Az aktív foglalkoztatáspolitikai eszközök fontosabb adatai 2021-ben.”
Szombati, K. 2021. “The consolidation of authoritarian rule in rural Hungary: Workfare and the shift from punitive populist to illiberal paternalist poverty governance.” Europe-Asia Studies 73(9): 1703-1725.
To what extent do existing labor market institutions support or hinder the transition to an inclusive labor market?
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Labor market institutions are fully aligned with the goal of an inclusive labor market.
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Labor market institutions are largely aligned with the goal of an inclusive labor market.
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Labor market institutions are only somewhat aligned with the goal of an inclusive labor market.
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Labor market institutions are not at all aligned with the goal of an inclusive labor market.
Ideologically rooted policies pushed by the government hinder the development of an inclusive labor market. This has included a reluctance to address the gender pay gap, anti-migration policies and a lukewarm commitment to integrating Roma more fully into the labor market. Against the background of an aging society, a new program launched in January 2024, the Workplace Generational Transition Program, aims to facilitate the transfer of knowledge and skills from experienced pre-retirement employees to young people beginning their careers. Moreover, since 2021, personal income tax (PIT) for those under 25 has been waived if their salary does not exceed the gross national average income of the preceding year (PwC 2024). In 2023, Hungary adapted its legislation to open the labor market to non-asylum-seeking “guest workers” who can stay and work in Hungary for up to three years, with the chance to resubmit their applications afterward. The gender pay gap in Hungary is severe, and despite improvements in women’s employment rates in the 2010s, the COVID-19 pandemic induced a backlash. With regard to the Roma population, average educational attainments that are lower than the national average and a very low rate of white-collar employment make qualification a central issue. As the labor market modernizes and more demanding jobs arise, qualification becomes crucial. Since 2014, the numbers have improved, but the pandemic also induced a backlash here. Still, employment rates among Roma in Hungary are Europe’s highest within this population, and the gap with respect to the national average is much lower than in neighboring Slovakia or Romania. This may be rooted in the emphasis on Hungary’s state-initiated work programs. However, the problems affecting women in the labor force in the country disproportionately affect female Roma, leading to a high unemployment rate in this population. Discrimination against Roma seeking employment also seems to be growing (FRA 2023: 46). In 2022, Hungary adopted its Social Integration Strategy 2020 – 2030, a follow-up to the EU Roma Strategic Framework 2020 – 2030. It declares that equal access to public services for Roma women is a horizontal concern, but there appears to be no clear interministerial dialogue or stakeholder involvement. Harsh criticism comes from the Roma self-government environment, which accuses political parties in Hungary of serving their own agendas rather than solving the problems (Roma Civil Monitoring 2024).
Citations:
European Union Agency for Fundamental Rights, FRA. 2022. “Roma in 10 European Countries. Main results.” https://fra.europa.eu/sites/default/files/fra_uploads/fra-2022-roma-survey-2021-main-results2_en.pdf
Roma Civil Monitoring. 2024. “Hungary.” https://romacivilmonitoring.eu/countries/hungary/
PwC. 2024. “Hungary - Individual - Deductions.” https://taxsummaries.pwc.com/hungary/individual/deductions
Citations:
European Union Agency for Fundamental Rights, FRA. 2022. “Roma in 10 European Countries. Main results.” https://fra.europa.eu/sites/default/files/fra_uploads/fra-2022-roma-survey-2021-main-results2_en.pdf
Roma Civil Monitoring. 2024. “Hungary.” https://romacivilmonitoring.eu/countries/hungary/
PwC. 2024. “Hungary - Individual - Deductions.” https://taxsummaries.pwc.com/hungary/individual/deductions
To what extent do existing labor market institutions support or hinder the mitigation of labor market risks?
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Labor market institutions are fully aligned with the goal of protecting individuals against labor market risks.
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Labor market institutions are largely aligned with the goal of protecting individuals against labor market risks.
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Labor market institutions are only somewhat aligned with the goal of protecting individuals against labor market risks.
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Labor market institutions are not at all aligned with the goal of protecting individuals against labor market risks.
Labor market oversight and regulation in Hungary are the responsibilities of the Ministry of National Economy, where a state secretariat oversees these functions. Services are provided via the employment fund and the National Employment Service. Social insurance in Hungary is offered to the entire nation. Essential health services for residents of Hungary are provided independently of employment or contributions to the social welfare system. Pension portability is organized in accordance with European standards. Adequate representation through trade unions in Hungary is lacking, as trade unions are fragmented and marginalized, even though company trade unions are widespread and in some sectors have considerable negotiating power (Neumann and Tóth 2018). Some key trade unions, such as the Hungarian Chamber of Commerce and Trade (MKIK), have been co-opted by the government and echo its policy priorities. Overall, social dialogue is weak.
Citations:
Neumann, L., and A. Tóth. 2018. “Hungarian Unions under Political and Economic Pressure.” Rough Waters: European Trade Unions in a Time of Crises, 127.
Citations:
Neumann, L., and A. Tóth. 2018. “Hungarian Unions under Political and Economic Pressure.” Rough Waters: European Trade Unions in a Time of Crises, 127.
Graph View
To what extent do existing tax institutions and procedures support or hinder adequate tax revenue flows?
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The tax system is fully aligned with the goals of ensuring adequate tax revenues.
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The tax system is largely aligned with the goals of ensuring adequate tax revenues.
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The tax system is only somewhat aligned with the goals of ensuring adequate tax revenues.
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The tax system is not at all aligned with the goals of ensuring adequate tax revenues.
Hungary raises a substantial amount of revenue through consumption taxes. The share of consumption taxes in overall revenue is 45.3%, which is significantly higher than the OECD average of 32.3%. Corporate taxes are extremely low, contributing only 2% of state revenues (OECD: 9.6%). Since 2010, successive Orbán governments have transformed the Hungarian tax system. In 2011, the progressive income tax was replaced with a flat tax. In 2012, the standard value-added tax (VAT) rate was increased from 25% to 27% – the highest level in the European Union – with reduced tax rates on selected products and services. In 2017, a uniform corporate income tax of 9% replaced a two-tier system with rates of 10% and 19%. The effective average tax rate for businesses dropped from 19.3% in 2016 to 11.1%. The personal income tax rate was flattened at 15%. Between 2017 and 2018, employers’ social security contributions were cut by seven percentage points. These changes have resulted in a slight decline in the tax-to-GDP ratio since 2016. The move to a flat income tax, combined with a strong reliance on the taxation of consumption, has made the Hungarian tax system less redistributive.
The tax burden, especially on larger companies, has substantially decreased. However, companies still struggle with frequent changes in taxation policy and the complexity of the tax regime, which includes many sectoral taxes. Moreover, tax policy and its administration have been instrumentalized to favor oligarchs close to Fidesz and punish outsiders. The classification of businesses as “reliable,” “average” or “risky” by the National Tax and Customs Authority (NAV) – combined with the promise of preferences for “reliable” taxpayers – points to favoritism.
In Hungary, the tax burden is high for the general population, while it allows companies to improve their productivity. Even so, the complexity of tax regulations and the high rate of social security contributions take a heavy administrative and financial toll on small and medium-sized companies, providing an incentive for tax evasion (Filep-Mosberger and Reiff 2022). This tax policy aligns with Fidesz’s neoliberal economic approach. Combining the employers’ and employees’ social contributions, the burden in Hungary is high.
Citations:
Filep-Mosberger, P., & Reiff, Á. 2022. “Income Tax Evasion Estimation in Hungary.” MNB Working Papers (No. 2022/4).
The tax burden, especially on larger companies, has substantially decreased. However, companies still struggle with frequent changes in taxation policy and the complexity of the tax regime, which includes many sectoral taxes. Moreover, tax policy and its administration have been instrumentalized to favor oligarchs close to Fidesz and punish outsiders. The classification of businesses as “reliable,” “average” or “risky” by the National Tax and Customs Authority (NAV) – combined with the promise of preferences for “reliable” taxpayers – points to favoritism.
In Hungary, the tax burden is high for the general population, while it allows companies to improve their productivity. Even so, the complexity of tax regulations and the high rate of social security contributions take a heavy administrative and financial toll on small and medium-sized companies, providing an incentive for tax evasion (Filep-Mosberger and Reiff 2022). This tax policy aligns with Fidesz’s neoliberal economic approach. Combining the employers’ and employees’ social contributions, the burden in Hungary is high.
Citations:
Filep-Mosberger, P., & Reiff, Á. 2022. “Income Tax Evasion Estimation in Hungary.” MNB Working Papers (No. 2022/4).
To what extent do existing tax institutions and procedures consider equity aspects?
10
9
9
The tax system is fully aligned with the goal of ensuring equity.
8
7
6
7
6
The tax system is largely aligned with the goal of ensuring equity.
5
4
3
4
3
The tax system is only somewhat aligned with the goal of ensuring equity.
2
1
1
The tax system is not at all aligned with the goal of ensuring equity.
Vertical equity in Hungary is shaped by the flat tax, which is measured as a share of income and strongly benefits higher-income deciles (Paulus et al. 2017). The high standard value-added tax (VAT) rate of 27% exacerbates the problem, as low-income families cannot avoid consumption and lack the ability to save money or invest. Regarding horizontal equity, all individuals with the same income level are subject to the same tax rate, irrespective of the source of their income. In terms of businesses, sectoral taxes discriminate against some companies. While this may be justified for the internalization of costs, such as with environmental taxes, discrepancies in Hungary do not align with this rationale. Rather, sector-specific taxation is employed by the government to target companies and branches that do not align with its ideology, such as foreign-owned businesses. Withholding taxes, as well as taxes on dividends, interest and royalties for companies, are set at 0%. Property taxes are low and contribute only 2.7% to state revenues (OECD average: 5.6%). This benefits a relatively broad segment of society, as the government’s family policy strongly encourages young families to buy property through several programs.
Citations:
Paulus, A., Lelkes, O., Čok, M., Kump, N., Hegedűs, P., Võrk, A., and S. Kralik. 2017. “Flat Tax Reform in Eastern Europe: A Comparative Analysis of Alternative Scenarios in Estonia, Hungary and Slovenia, Using EUROMOD.” In Tax and Benefit Policies in the Enlarged Europe, Routledge, 91-123.
Citations:
Paulus, A., Lelkes, O., Čok, M., Kump, N., Hegedűs, P., Võrk, A., and S. Kralik. 2017. “Flat Tax Reform in Eastern Europe: A Comparative Analysis of Alternative Scenarios in Estonia, Hungary and Slovenia, Using EUROMOD.” In Tax and Benefit Policies in the Enlarged Europe, Routledge, 91-123.
To what extent do existing tax institutions and procedures minimize compliance and collection costs?
10
9
9
The tax system is fully aligned with the goal of minimizing compliance and collection costs.
8
7
6
7
6
The tax system is largely aligned with the goal of minimizing compliance and collection costs.
5
4
3
4
3
The tax system is only somewhat aligned with the goal of minimizing compliance and collection costs.
2
1
1
The tax system is not at all aligned with the goal of minimizing compliance and collection costs.
The Hungarian tax system was ranked 11th out of 100 on the 2023 OECD international tax competitiveness index, earning 75 points. With more than 80 international treaties regulating tax issues worldwide, Hungary has a comparably high number. The country’s tax administration capacity is also relatively high. In terms of complexity, Hungary’s tax system ranks in the middle among EU countries. Digitalization has advanced rapidly, making the Hungarian system highly advanced and almost paper-free. The Hungarian tax authority (NAV) prepares draft personal income tax returns for citizens, which taxpayers need only accept or supplement if needed. However, for freelancers and entrepreneurs, the administrative burden and complexity of tax declarations have significantly increased. This followed the phase-out of a simple and highly popular fixed-rate tax scheme (KATA) in 2022, sparking protests and leading to the introduction of more costly and complicated alternatives for non-employees (Euronews 2022). The authority collects vast amounts of data and already uses AI algorithms. Concerns have been raised about the potential misuse of tax authorities to pressure individuals or companies opposed to the government. Efficiency and surveillance, therefore, have gone hand in hand.
Citations:
Euronews. 2022. “Hungarians protest for second day against tax overhaul.” 14 July. https://www.euronews.com/2022/07/14/hungarians-protest-for-second-day-against-tax-overhaul
Citations:
Euronews. 2022. “Hungarians protest for second day against tax overhaul.” 14 July. https://www.euronews.com/2022/07/14/hungarians-protest-for-second-day-against-tax-overhaul
To what extent do existing tax institutions and procedures internalize negative and positive externalities?
10
9
9
The tax system is fully aligned with the goal of internalizing externalities.
8
7
6
7
6
The tax system is largely aligned with the goal of internalizing externalities.
5
4
3
4
3
The tax system is only somewhat aligned with the goal of internalizing externalities.
2
1
1
The tax system is not at all aligned with the goal of internalizing externalities.
In 2023, several new pieces of legislation in the environmental sector were introduced, but administrative problems remain. Taxation has not been harmonized with ecological sustainability and quality goals for a long time. Although environmental tax revenues in Hungary have been slightly higher than the EU average, issues persist with Hungary’s tax structure due to numerous exemptions and special taxes (e.g., subsidies for reorganizing the coal sector). Over the past two decades, environmentally related tax revenue has consistently declined as a percentage of total tax revenue. VAT on cross-border digital services (27%) has been introduced. Recently, the government introduced the extended producer responsibility (EPR) principle, significantly impacting green taxation. So far, green taxation has served as both a financing tool for the Hungarian waste management system and a measure to increase the price level of environmentally harmful goods. The first role will be shifted to the new EPR regime, and the sole purpose of the green tax will be tackling harmful goods via price (Andersen, 2023). This will also affect the circular economy.
To address CO2 emissions, the government introduced new payment obligations for operators of facilities receiving free emission allowances (Government Decree No. 320/2023. (VII. 17.)), also known as the CO2-quota tax. Additionally, transaction fees will apply.
In terms of internalizing positive externalities, the government provides selected companies with corporate tax breaks and direct subsidies in exchange for investments in R&D, education and training through the so-called Strategic Partnership Agreements. Although these agreements have not been fully transparent and have provided advantages to these companies on top of the already extremely low corporate income tax rate, they have led to partnerships between higher education institutions and companies, mostly in the car manufacturing industry and related disciplines (Martin 2023).
Citations:
Andersen. 2023. “Extended Producer Responsibility – Significant changes in the Hungarian green tax legislation.” https://hu.andersen.com/news/extended-producer-responsibility-significant-changes-in-the-hungarian-green-tax-legislation
Martin, J. P. 2023. “From Dual Economy to Parallel Universes: Attitudes and Coping Strategies of Businesses vis-à-vis Crony State Capitalism – the Case of Hungary.” CIPE Working Paper. https://www.cipe.org/resources/from-dual-economy-to-parallel-universes-attitudes-and-coping-strategies-of-businesses-vis-a-vis-crony-state-capitalism-the-case-of-hungary/
To address CO2 emissions, the government introduced new payment obligations for operators of facilities receiving free emission allowances (Government Decree No. 320/2023. (VII. 17.)), also known as the CO2-quota tax. Additionally, transaction fees will apply.
In terms of internalizing positive externalities, the government provides selected companies with corporate tax breaks and direct subsidies in exchange for investments in R&D, education and training through the so-called Strategic Partnership Agreements. Although these agreements have not been fully transparent and have provided advantages to these companies on top of the already extremely low corporate income tax rate, they have led to partnerships between higher education institutions and companies, mostly in the car manufacturing industry and related disciplines (Martin 2023).
Citations:
Andersen. 2023. “Extended Producer Responsibility – Significant changes in the Hungarian green tax legislation.” https://hu.andersen.com/news/extended-producer-responsibility-significant-changes-in-the-hungarian-green-tax-legislation
Martin, J. P. 2023. “From Dual Economy to Parallel Universes: Attitudes and Coping Strategies of Businesses vis-à-vis Crony State Capitalism – the Case of Hungary.” CIPE Working Paper. https://www.cipe.org/resources/from-dual-economy-to-parallel-universes-attitudes-and-coping-strategies-of-businesses-vis-a-vis-crony-state-capitalism-the-case-of-hungary/
Graph View
To what extent do existing budgetary institutions and procedures support or hinder sustainable budgeting?
10
9
9
Budgetary institutions and policies are fully aligned with the goals of sustainable budgeting.
8
7
6
7
6
Budgetary institutions and policies are largely aligned with the goals of sustainable budgeting.
5
4
3
4
3
Budgetary institutions and policies are only somewhat aligned with the goals of sustainable budgeting.
2
1
1
Budgetary institutions and policies are not at all aligned with the goals of sustainable budgeting.
Hungary’s public debt gradually declined from nearly 80% of GDP in 2012 to less than 67% in 2019. However, this trend reversed during the COVID-19 pandemic when Hungary produced significant budget deficits, which currently remain between 5% and 6%. In terms of overall debt, Hungary ranks in the midfield among its OECD peers, with debt amounting to around 70% of GDP in the first post-COVID years. In the indicator of gross general government interest payments as a percentage of GDP, Hungary ranks poorly, placing second to last among OECD-30 countries.
Hungary’s Fiscal Council has warned of significant risks concerning the 2024 budget. Over the years, the government has shifted its priorities from budget consolidation to promoting growth. Within the government, there appears to be a lack of unity on this issue. Prime Minister Viktor Orbán and Minister for Economic Development Márton Nagy favor growth, while Finance Minister Mihály Varga and Central Bank of Hungary head György Matolcsy (MNB) have sought to protect stability. Tensions between the government and the central bank escalated to unprecedented levels during 2023, a record year for inflation, with an annual rate of 17.6% (Reuters 2023).
In anticipation of the parliamentary elections in April 2022, budgetary policy remained highly expansive in 2021 and early 2022, with the government front-loading many popular measures in the months before the elections (Virovacz 2022). As deficits threatened to spiral out of control, the government unexpectedly froze some planned investments at the end of 2021 (Than 2021). The Hungarian budget heavily depends on the inflow of grants from European funds. Consequently, the European Union’s Article 7 procedure and the subsequent freezing of funding severely impacted Hungary’s budgets.
Consequently, several reforms were halted, and the government announced that wage increases, such as those for teachers, would be impossible unless additional funds are secured, which partially occurred in 2023 – 2024. Ultimately, the greatest risks to the stability of the Hungarian budget stem from the illiberal stance and the confrontation with international donors. The “sawing off the branch we are sitting on” policy has a significant potential to backfire.
Citations:
Than, K. 2021. “Hungary Trims 2022 Budget Deficit Target to Shield Local Bond Market.” Reuters, December.
https://www.reuters.com/markets/rates-bonds/hungary-cuts-2022-budget-deficit-target-49-gdp-59-202112-17/).
Virovacz, P. 2022. “Hungarian Budget Deficit Balloons.” ING Bank, March 8.
https://think.ing.com/snaps/hungarian-budget-deficit-balloons-february-2022Reuters. 2023. “Hungary’s Orban Hits Back at Central Bank in Growing Rift Over High Inflation.” 9 March. https://www.reuters.com/markets/europe/hungarys-orban-says-central-bank-money-supply-cuts-are-too-drastic-2023-03-09/
Hungary’s Fiscal Council has warned of significant risks concerning the 2024 budget. Over the years, the government has shifted its priorities from budget consolidation to promoting growth. Within the government, there appears to be a lack of unity on this issue. Prime Minister Viktor Orbán and Minister for Economic Development Márton Nagy favor growth, while Finance Minister Mihály Varga and Central Bank of Hungary head György Matolcsy (MNB) have sought to protect stability. Tensions between the government and the central bank escalated to unprecedented levels during 2023, a record year for inflation, with an annual rate of 17.6% (Reuters 2023).
In anticipation of the parliamentary elections in April 2022, budgetary policy remained highly expansive in 2021 and early 2022, with the government front-loading many popular measures in the months before the elections (Virovacz 2022). As deficits threatened to spiral out of control, the government unexpectedly froze some planned investments at the end of 2021 (Than 2021). The Hungarian budget heavily depends on the inflow of grants from European funds. Consequently, the European Union’s Article 7 procedure and the subsequent freezing of funding severely impacted Hungary’s budgets.
Consequently, several reforms were halted, and the government announced that wage increases, such as those for teachers, would be impossible unless additional funds are secured, which partially occurred in 2023 – 2024. Ultimately, the greatest risks to the stability of the Hungarian budget stem from the illiberal stance and the confrontation with international donors. The “sawing off the branch we are sitting on” policy has a significant potential to backfire.
Citations:
Than, K. 2021. “Hungary Trims 2022 Budget Deficit Target to Shield Local Bond Market.” Reuters, December.
https://www.reuters.com/markets/rates-bonds/hungary-cuts-2022-budget-deficit-target-49-gdp-59-202112-17/).
Virovacz, P. 2022. “Hungarian Budget Deficit Balloons.” ING Bank, March 8.
https://think.ing.com/snaps/hungarian-budget-deficit-balloons-february-2022Reuters. 2023. “Hungary’s Orban Hits Back at Central Bank in Growing Rift Over High Inflation.” 9 March. https://www.reuters.com/markets/europe/hungarys-orban-says-central-bank-money-supply-cuts-are-too-drastic-2023-03-09/
Graph View
How committed is the government to utilizing research and innovation as drivers for the transition to a sustainable economy and society?
10
9
9
The government is clearly committed to utilizing research and innovation as drivers for the transition to a sustainable economy and society.
8
7
6
7
6
The government is largely committed to utilizing research and innovation as drivers for the transition toward a sustainable economy and society.
5
4
3
4
3
The government is somewhat committed to utilizing research and innovation as drivers for the transition toward a sustainable economy and society.
2
1
1
The government is not at all committed to utilizing research and innovation as drivers for the transition toward a sustainable economy and society.
Hungary presents a mixed picture concerning research and innovation. The country’s overall number of patents is low, but intellectual property holdings are stronger. Concerning high-tech exports, the performance is solid. Hungary belongs to the eco-innovation catch-up group (Gulyas 2022: 3), having shown a slow but continuous climb up the ranks in this group, while still displaying a growing gap relative to the EU average. Hungary was at 69.8% of the EU average in 2022, and while the EU improved by 9.9%, Hungary achieved only a 7.1% improvement (European Innovation Scoreboard 2022). In the eco-innovation index, Hungary reached 96.2% of the EU average, with extraordinary strength in societal behavior (134.7) but weaknesses in the area of business operations (78.4) (Gulyas 2022:3).
Hungary’s strengths lie in the number of foreign doctorate students, the level of government support for business R&D, medium and high-tech goods exports, and job-to-job mobility in a flexible labor market. However, there has been a decrease in the areas of sales of innovative products, environment-related technologies, resource productivity and innovation expenditures per employee (European Innovation Scoreboard 2022).
Data from the Hungarian Statistical Office (KSH) indicate that R&D expenditures in the public sector grew steadily until recently, but have now taken a negative turn. From the peak year of 2021, R&D expenditure as a share of GDP fell sharply to 1.39% in 2022. R&D as a share of total investment peaked in 2017 at 1.10% but decreased to 0.69% in 2022.
In recent years, the government has initiated highly controversial structural reforms that have infringed upon academic freedom (Enyedi 2018; Pető 2018) and are likely to weaken the country’s research and innovation (R&I) performance. The creation of the new, powerful Ministry of Innovation and Technology (ITM) has been accompanied by the “privatization” of universities and the restructuring of the Academy of Sciences (MTA). Privatizing universities has involved placing eight institutions under newly established “private” foundations controlled by loyal Fidesz supporters. Some of these supporters have had to resign due to conflicts of interest flagged by the European Commission within the rule-of-law conditionality mechanism (Balkan Insight 2023). The MTA has been stripped of its research institutes, leading to the creation of the Lóránd Eötvös Research Network (ELKH, Eötvös Lóránd Kutatási Hálózat). Officially justified as an attempt to make the public research sector more competitive, these changes have drastically reduced the autonomy of the institutions. The R&D sector faces significant challenges, and government action is required. Cooperation between scientific institutions appears to be an issue, particularly in the energy sector and with regard to carbon neutrality policies. The current plan provides minimal information on research, innovation and competitiveness measures in clean and low-carbon energy technologies. It does not include quantified national-level targets (European Commission 2023:6). Following the 2022 general elections, the government structure was reformed again. The Ministry of Innovation and Technology was dissolved, and a new Ministry of Culture and Innovation was established. This new ministry no longer controls energy policy, which has been outsourced to a separate Ministry of Energy.
Citations:
Gulyas, O. 2022. Eco-Innovation Country Profile 2022: Hungary. Brussels: BSoG.
European Innovation Scoreboard 2022, https://ec.europa.eu/assets/rtd/eis/2022/ec_rtd_eis-country-profile-hu.pdf
European Commission. 2023. “Assessment of the Draft Updated National Energy and Climate Plan of Hungary.” SWD(2023) 916 final. https://commission.europa.eu/system/files/2023-12/SWD_Assessment_draft_updated_NECP_Hungary_2023.pdf
Enyedi, Z. 2018. “Democratic Backsliding and Academic Freedom in Hungary.” Perspectives on Politics 16(4): 1067-1074.
Peto, A. 2018. “Attack on Freedom of Education in Hungary: The Case of Gender Studies.”
Balkan Insight. 2023. “Hungary’s Government Faces Unintended Consequence of Its University Reforms.” January 10. https://balkaninsight.com/2023/01/10/hungarys-government-faces-unintended-consequence-of-its-university-reforms
Hungary’s strengths lie in the number of foreign doctorate students, the level of government support for business R&D, medium and high-tech goods exports, and job-to-job mobility in a flexible labor market. However, there has been a decrease in the areas of sales of innovative products, environment-related technologies, resource productivity and innovation expenditures per employee (European Innovation Scoreboard 2022).
Data from the Hungarian Statistical Office (KSH) indicate that R&D expenditures in the public sector grew steadily until recently, but have now taken a negative turn. From the peak year of 2021, R&D expenditure as a share of GDP fell sharply to 1.39% in 2022. R&D as a share of total investment peaked in 2017 at 1.10% but decreased to 0.69% in 2022.
In recent years, the government has initiated highly controversial structural reforms that have infringed upon academic freedom (Enyedi 2018; Pető 2018) and are likely to weaken the country’s research and innovation (R&I) performance. The creation of the new, powerful Ministry of Innovation and Technology (ITM) has been accompanied by the “privatization” of universities and the restructuring of the Academy of Sciences (MTA). Privatizing universities has involved placing eight institutions under newly established “private” foundations controlled by loyal Fidesz supporters. Some of these supporters have had to resign due to conflicts of interest flagged by the European Commission within the rule-of-law conditionality mechanism (Balkan Insight 2023). The MTA has been stripped of its research institutes, leading to the creation of the Lóránd Eötvös Research Network (ELKH, Eötvös Lóránd Kutatási Hálózat). Officially justified as an attempt to make the public research sector more competitive, these changes have drastically reduced the autonomy of the institutions. The R&D sector faces significant challenges, and government action is required. Cooperation between scientific institutions appears to be an issue, particularly in the energy sector and with regard to carbon neutrality policies. The current plan provides minimal information on research, innovation and competitiveness measures in clean and low-carbon energy technologies. It does not include quantified national-level targets (European Commission 2023:6). Following the 2022 general elections, the government structure was reformed again. The Ministry of Innovation and Technology was dissolved, and a new Ministry of Culture and Innovation was established. This new ministry no longer controls energy policy, which has been outsourced to a separate Ministry of Energy.
Citations:
Gulyas, O. 2022. Eco-Innovation Country Profile 2022: Hungary. Brussels: BSoG.
European Innovation Scoreboard 2022, https://ec.europa.eu/assets/rtd/eis/2022/ec_rtd_eis-country-profile-hu.pdf
European Commission. 2023. “Assessment of the Draft Updated National Energy and Climate Plan of Hungary.” SWD(2023) 916 final. https://commission.europa.eu/system/files/2023-12/SWD_Assessment_draft_updated_NECP_Hungary_2023.pdf
Enyedi, Z. 2018. “Democratic Backsliding and Academic Freedom in Hungary.” Perspectives on Politics 16(4): 1067-1074.
Peto, A. 2018. “Attack on Freedom of Education in Hungary: The Case of Gender Studies.”
Balkan Insight. 2023. “Hungary’s Government Faces Unintended Consequence of Its University Reforms.” January 10. https://balkaninsight.com/2023/01/10/hungarys-government-faces-unintended-consequence-of-its-university-reforms
Graph View
How committed and credible is the government in its activities to guide the effective regulation and supervision of the international financial architecture?
10
9
9
The government is clearly committed to ensuring the stability of the global financial system.
8
7
6
7
6
The government is largely committed to ensuring the stability of the global financial system.
5
4
3
4
3
The government is somewhat committed to ensuring the stability of the global financial system.
2
1
1
The government is not at all committed to ensuring the stability of the global financial system.
As a member of the European Union, Hungary has participated in the EU’s efforts to improve the regulation and supervision of financial markets. However, the country has not adopted the euro and has remained outside the European Banking Union. Oligarchs profit from deregulated financial markets and less stringent control mechanisms, making robust government engagement in this area highly unlikely. As a country with a low corporate income tax rate, Hungary has opposed G-7 and OECD attempts to introduce a global minimum corporate income tax. Hungary is relatively passive in shaping the international financial-market regulatory framework, except when using its veto position in the EU Council to obstruct financial schemes such as financial aid for Ukraine. This shortsighted blackmailing strategy may negatively affect Hungary’s access to European funds in the long run, and is thus counterproductive. Moreover, the Central Bank of Hungary has taken a restrictive stance toward new fintech companies such as Revolut and Wise, applying the 0.3% transaction fee to them and repeatedly pushing these companies to establish a Hungarian affiliate (e.g., MNB 2022).
Citations:
MNB. 2022. “No progress for the time being in Revolut’s becoming a subsidiary bank.” https://www.mnb.hu/en/pressroom/press-releases/press-releases-2022/no-progress-for-the-time-being-in-revolut-s-becoming-a-subsidiary-bank
Citations:
MNB. 2022. “No progress for the time being in Revolut’s becoming a subsidiary bank.” https://www.mnb.hu/en/pressroom/press-releases/press-releases-2022/no-progress-for-the-time-being-in-revolut-s-becoming-a-subsidiary-bank