In view of the impending high budget deficit and frozen EU aid worth billions, the Hungarian government has introduced a new “excess profit tax” for the country’s pharmaceutical manufacturers.
According to a government regulation that came into force on Saturday, they should pay up to 8.0 percent of their net income to the state, depending on sales. The maximum tax rate applies to pharmaceutical companies with net annual revenues of more than 150 billion forints (about 375 million euros). The measure also applies retrospectively to 2022.
As early as July of this year, Hungary’s right-wing government introduced an “extra-profit tax” to skim off real or supposed “excess profits” from various sectors of the economy. Among others, energy companies, banks, insurers, telecommunications companies and airlines are included.
EU freezes billions for Hungary
The business portal “portfolio.hu” analyzed that the government wanted to reduce the feared high budget deficit with the new tax. For this year, Hungary’s government had planned a deficit of 4.9 percent of gross domestic product (GDP).
The EU Commission could withhold billions in subsidies for Hungary from the European Community budget because of constitutional concerns. A spokesman for the Brussels authority confirmed on Friday that the conditions for the payment of 22 billion euros by 2027 from the so-called cohesion fund to promote structurally weak areas are currently not met.
Because of the insufficient fight against corruption in Hungary, the EU states have just frozen 6.3 billion euros in cohesion funds for the country.
Hungarian Law Gazette Report and Analysis, Hungarian
