Budapest Business Journal by Business Publishing Services Kft.

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BBJ HUNGARY’S PRACTICAL BUSINESS

VOL. 20, NUMBER 4

I FEB 24, 2012 – MAR 9, 2012

Budapest Business Journal

BI-WEEKLY SINCE 1992 | WWW.BBJ.HU

Tax effects

FOCUS

Tax regulations have Whatevergate changed. What is waiting Media must sell their products, for employers and so they deliver an amphetamine employees? Who does it for the boring everyday. A special trait of the Hungarian scanhelp? Who does it drag dal market is that the more infuriating public cases tended to down into the depths? PAGE 11

reach the audience via watchdog media. PAGE 7

LAUGHING MATTER

MARKET WATCH

Sarcasm and derision

Uncertainty worries expats in Hungary

Pest Jokes are deeply rooted in Jewish humor. And Jewish humor is rooted in traditions. Isaac Asimov suggests that Jewish stock jokes are actually the collective subconscious of Jewry, a living memory of almost 5,500 years of Jewish culture. PAGE 10

Unpredictable government decisions and uncertainty in politics are the main worries for expat managers in Hungary these days. Most think that the economy will not improve any time soon. PAGE 6

2 CONTENTS

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NEWS

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NEWS

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Uncertainty worries expats in Hungary

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A big success from sweet little things

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SPECIAL REPORT

Tax effects

Hungary is one of three countries, along with Estonia and Slovenia, with tax levels exceeding the EU-27 average, according the 2011 edition of Eurostat’s report on taxation trends in the European Union.

SPECIAL REPORT

Taxpayers face closer scrutiny in 2012 Taxpayers will face closer checks and tougher sanctions from the tax authority in 2012. But how will the authority cope with its new responsibilities?

SOCIALITE

A big success from sweet little things Most Hungarians associate marzipan with the name Szamos. Read why...

LAUGHING MATTER

Sarcasm and derision Jews about Jews in the Pesti Vicc

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NEWS 3

Budapest Business Journal | Feb 24 – mar 9

digest

It occurred to me that nothing is more interesting than opinion when opinion is interesting HERBERT BAYARD SWOPE, THE NEW YORK EVENING WORLD, 1921

full force of the law has been unleashed against Dr Geréb, the obstetricians so far seem immune from legal sanction.”

FEBRUARY 16, 2012

Home delivery Homebirth is a sensitive topic. As such, the legally binding verdict passed down on February 10 that sentenced obstetrician Ágnes Geréb to two years in prison has made headlines not just in Hungary, but also across the world. This offers an opportunity to examine the case from various standpoints. An internationally recognized homebirth expert, Geréb was arrested in October 2010 for helping a pregnant woman who unexpectedly went into labor during a birth-training course. At that time, Geréb was prohibited from practicing due to an earlier incident that ended in the death of a baby. The case, which immediately mobilized human rights activists worldwide, is clearly a result of home-births being so under-regulated at that time. To ease the scandal that followed Geréb’s custody, and also to put an end to the long struggle not just of women wishing to give

birth outside of hospitals but also the professionals helping these mothers, the government introduced detailed regulation on homebirths. However, the regulation lays down such strict conditions that giving birth at home legally is nearly impossible. Still, Geréb had to face a court because of the tragic incident mentioned above, as well as for another case in which a one-yearold baby died as a result of injuries sustained at birth. Besides the two-year prison sentence, the Budapest Court of Appeal also banned Geréb from working in her profession two weeks ago.

FEBRUARY 14, 2012 An article published on Eastern Approaches, a blog of the weekly The Economist focusing on Central and Eastern European affairs, takes a critical, outspoken standpoint on the case of Geréb, starting with the headline “Hun-

NO HUNGARIAN OBSTETRICIAN HAS EVER BEEN SUBJECTED TO SUCH SEVERE SANCTIONS FOR MALPRACTICE. The Economist garian home-births: The bullies of Budapest”. The picture shows Geréb broken by the long months spent in prison, a fact that is later spelled out in words too. Geréb is “thin, frail, and preparing for prison,” the blog said. After describing the anger of Geréb’s supporters and “outraged campaigners,” author Adam LeBor expresses surprise at the rigor of the Hungarian Court of Appeals, mentioning that Geréb was led into the court in shackles. “No Hungarian obstetrician has ever been subjected to such severe sanctions for malpractice,” he adds, calling the entire court issue “ironic”. The article places the case in a wider perspective in mentioning Hungary’s new home birth legisla-

tion, which came into effect in 2011 as a result of Geréb’s years-long campaign for women’s right to deliver babies at home. The entire Hungarian health care system also gets its share. It is “patriarchal, hierarchical and old-fashioned,” the author says, adding that for the system, “pregnant women are an inconvenience, except when they are handing over their envelopes”. The fact that patients in Hungary, a “cash-strapped society”, have to slide money into private pockets to get state-financed health services shows that bribes are acceptable in this country, therefore government regulations on homebirth, and the imprisonment of Geréb will not be efficient, the post says. “But although the

Boston University’s news site Wbur.org compares the American and Hungarian approaches to homebirths. The author, Rachael Zimmermann, starts with the statement that homebirths are popular in the United States, due to the efforts of various groups that support midwives and keep the public well informed about their options when it comes to childbirth. “But things don’t look so great for homebirth supporters in Hungary.” The post continues by detailing Geréb’s case without going into subjective comments or taking extreme sides. It rather remains a simple comparison that, for all that, gives the impression that Hungary is not as liberal as America in the question of homebirths. Although Zimmermann does not express public judgment in her post, she does add that, “[Geréb’s] supporters say she has been singled out for punishment due to her role assisting and championing homebirths.” The article adds a link at the end to the Facebook site of Geréb’s supporters.

FEBRUARY 16, 2012 Imre Para-Kovács, a wellknown publicist who wrote an article on Geréb published in the opinion section of hvg.hu, the online version of weekly HVG, takes a prosaic view: it looks at Geréb as an individual and at her case as a personal attack on her by the Hungarian authorities. Para-Kovács starts with

a descriptive line, imagining Geréb in shackles, waiting for her final verdict. His opinion is made clear in the second sentence: “She obviously received a counterproductive and excessive decision.” After that, he puts the responsibility on the government and on Prime Minister Viktor Orbán personally for appointing “brainless but loyal” people to high positions. According to the article, the Geréb case is not only about one individual, although it starts at that level, but it is also a sign of the fact that the Hungarian system is being pulled down by corrupt leadership. Para-Kovács includes an insight into a personal conversation with his wife, arguing about the possibilities of whether or not President Pál Schmitt will give clemency to Geréb. Schmitt is the only person who could legally stop the court from carrying out the two-year sentence against the midwife.The article ends with a sarcastic expression about how great it is to live now in Hungary.

FEBRUARY 14, 2012 Dr László Haskó’s article published in Nol.hu, the online version of leftwing daily Népszabadság, provides an analysis of homebirths, its origins, and proper practices. The author clarifies his viewpoint at the very beginning: Geréb’s imprisonment is exaggerated and cruel, Haskó says. But he also mentions that Geréb broke health care laws, one being the breaking of her medical oath. He also adds judgment on the Hungarian court system, stating “a reasonable and humanitarian punishment simply does not exist in Hungarian law”. It would have been enough to ban Geréb from practicing her profession, Haskó suggests. HG ÁV

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4 NEWS

Budapest Business Journal | Feb 24 – mar 9

[ EXPERT OPINION ]

On the amendment of certain rules of commercial arbitration DR. TAMÁS SÁNDOR Managing partner

NOTE: ALL ARTICLES MARKED EXPERT OPINIONS ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILITY

The amendment of some rules of the arbitration procedure at the end of last year by the National Assets Act is, from a professional point of view, very questionable. This amendment touches very sensible points of the arbitration (language, applicable law, seat, etc.) and it violates the principle of sector neutrality It is common knowledge that arbitration is one of the important institutions of commercial law relationships. It is also common knowledge that one argument against ordinary court procedure is the discretionary power that the parties have in arbitration, the parties themselves may decide on numerous significant issues regarding the procedure. An example is the right of the parties to appoint arbitrators. The essence of arbitration is that it constitutes an exception to the ordinary court system inasmuch as arbitration courts pierce through the judicial monopoly of ordinary courts, giving greater ground to the agreement of the parties. In Hungary arbitration is currently regulated by Act LXXI of 1994 on Arbitration (hereinafter: “the Act”). Section 1 of the Act regulates its scope. The Act – unless it provides otherwise – shall apply if the venue (seat) of the “ad hoc” or permanent court of arbitration is in Hungary. A further issue is the personal scope of the Act, i.e. the definition of who may initiate arbitral proceedings. These cases are listed in Paragraph (1) of Section 3 of the Act; point a) sets out that at least one of the parties must be professionally engaged in business activities and that the legal dispute to be resolved by arbitration must have arisen out of or in connection with this activity. An additional condition (as set out in point c) of Section 1 of the Act) is that the parties must submit themselves and their dispute to the jurisdiction of the court of arbitration. The agreement to submit to the jurisdiction of the court of arbitration is only valid if made in writing. The provisions of the Act are basically mandatory, which is not in contradiction with what was said about the discretionary powers of the parties. These strict rules are necessary (see , for example, the requirement to stipulate in writing the agreement to submit to arbitration) exactly because the arbitral proceeding, as was referred to above may only be carried out based on an explicit written stipulation, i.e. an arbitration agreement. In 2011 Parliament adopted Act CXCVI of 2011 on National Assets (hereinafter “the National

Assets Act”), which formally did not affect the Act, however this is only seemingly so. In fact the National Assets Act amended the provisions regulating the scope of the Act. It did so by approaching the issue from the aspect of the subject matter of the potential legal dispute. Paragraph (3) Section 17 of the National Assets Act sets forth the following: “The entity entitled to dispose over a national asset may only stipulate in a civil law contract relating to a national asset located on the territory surrounded by the borders of Hungary the Hungarian language as governing language, Hungarian law as governing law, and in case of a legal dispute the competence of a Hungarian court –excluding courts of arbitration. The entity entitled to dispose over a national asset may not stipulate the competence of a court of arbitration.” Let’s ignore the phrasing “located on the territory surrounded by the borders of Hungary”, and let’s focus rather on the real contents of the cited legal provision. The amendment affects the scope of persons who may take part in arbitral proceedings, furthermore it affects three major elements of the proceedings: the applicable law, the language of the contract and the proceeding court. Above all, it is clear that the entity entitled to dispose over a national asset (the state and local governments) may not stipulate the competence of a court of arbitration in its civil law contracts, jurisdiction of a foreign court of arbitration is excluded. Compared to this, the provision regarding the compulsory application of Hungarian language as governing language and Hungarian law as governing law seems a small extra. Presumably the new regulation was based on the idea that ordinary courts protect Hungarian interests better in lawsuits against foreign counterparties than courts of arbitration. This is not so, and if there was such an argument, then it is false. On the other hand the issue of ongoing procedures has not been settled, as with the Act entering into force the prohibitive provisions described herein have also entered into force. It is indeed a question whether besides the national assets mentioned in Paragraph (2) of Section 17 of the National Assets Act that become the property of the state or a local government following the entry into force of the National Assets Act there are any national assets that have previously become the property of the state or a local government, however this question is not answered. It is to be noted that by requiring the compulsory application of the Hungarian language and Hungarian law as governing law what will certainly be achieved is that a number of contracts – maybe important contracts for Hungary – will not be concluded because the foreign counterparty will not accept these conditions.

bi-weekly

NEWS FOR THESE PAGES IS FROM THE BUDAPEST BUSINESS JOURNAL’S DAILY BRIEFING, HUNGARY A.M.

ECONOMY

appointed in 2011, on one side and Simor and his two deputies on the other.

HUNGARY SHOULD HOLD RATES UNTIL IMF AGREEMENT, MNB RATE-SETTERS TELL BLOOMBERG

Q4 GDP GROWTH BETTER THAN EXPECTED

Hungary’s central bank should keep borrowing costs unchanged until the government agrees an International Monetary Fund bailout, which may allow rate cuts, Monetary Council members Ferenc Gerhardt and György Kocziszky told Bloomberg on February 16. The two, along with the oth-

Hungary’s economy grew at a faster than expected clip in the fourth quarter, analysts told MTI. Hungary’s GDP growth was an unadjusted 1.4% in Q4 and 1.7% for the full year, the Central Statistics Office (KSH) said. Péter Duronelly of fund manager Budapest Alapkezelő said investments probably edged down, domestic consump-

HUNGARIAN-BUILT SATELLITE LAUNCHED Masat-1, a satellite built at Hungary’s Budapest University of Technology (BME), was launched from French Guyana on Monday, February 13 at 11:13 a.m. CET by the new Vega booster rocket of the European Space Agency (ESA). The life span of Masat-1 is expected to reach up to five or six years. After that, the satellite will become space debris that is expected to hit the atmosphere of Earth and burn up within 20 years. er two external members of the Council, voted for keeping the rate on hold at the last rate-setting meeting on January 24, outvoting MNB governor András Simor and his two deputies, who voted for a 50bp rate hike. “The government clearly and decisively committed itself to an agreement with the IMF,” Gerhardt said. “This justifies a calm, wait-andsee attitude.” An IMF deal may “strengthen” the case for the “start of a rate-cut cycle”, Kocziszky said. Both Gerhardt and Kocziszky rejected the idea that a split had emerged in the Monetary Council with the four new external rate-setters,

ERSTE TO WIND UP PRIVATE PENSION BUSINESS Erste Bank’s pension fund will propose to shareholders the winding up its mandatory private pension fund business, it told MTI on February 20. The proposal will be put to shareholders at a general meeting on July 1. Erste Pension Fund managing director Lajos Mohr said amendments approved by Parliament at the end of last year had created a difficult position for market players. Most private pension fund members of the previous mandatory pillar had decided to return to the state pension system, together with their retirement savings, last year.

CREDIT AGRICOLE BANK CLOSES BRANCH IN HUNGARY

tion stagnated and export growth accelerated slightly during the period. He added that the second reading of the data was likely to show that the structure of growth was different in Q4 than for the full year. He projected a 2% contraction of Hungary’s economy in 2012.

France’s Credit Agricole Bank is closing its branch in Hungary, the bank’s press department in Paris said. A decision has not yet been taken on a date for closing the branch, but clients have already been informed of the move, the paper said. The press department said no new contracts are being signed at the branch and client services are being transferred.

BUSINESS

POLITICS

RYANAIR BACK IN BUDAPEST

CITIZENSHIP CASE GOES TO STRASBOURG

Budapest Airport announced that Irish lowcost carrier Ryanair has returned to Budapest and was due to commence direct services to six of a total of 32

Your first address if you like to start business in Slovakia! cegekalapitasa.hu www.eversheds.hu

European destinations as of February 21. Destinations include Barcelona, Stockholm, Madrid, Dublin and two new routes to London and Karlsruhe. The 26 additional routes will start operating within the coming weeks. Ryanair’s route to Karlsruhe will offer direct access to the Black Forest region and the spa-town of Baden-Baden. Ryanair fares start from £8.33/€9.99/HUF 2,999 for a one-way flight.

The family of 99-year-old ethnic Hungarian Mrs Aladár Tamás is asking the European Court of Human Rights to declare that she was deprived of her Slovak citizenship illegally because she had acquired Hungarian citizenship. Mrs Tamás was granted Hungarian citizenship last April in a fast-track procedure in view of her age. A local authority asked her to return her Slovak documents in early December.

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NEWS 5

Budapest Business Journal | Feb 24 – mar 9

energy EU SEEKS TRANSPARENCY IN NATURAL RESOURCES DEALS The EU took a step on Monday (February 20) towards ending secret deals between governments and large oil, gas, mining and logging firms by demanding that companies disclose payments in countries where they operate. Industry ministers from the 27-nation bloc approved a plan by the European Commission that aims “to help fight corruption, abuse of public resources and moneylaundering,” said Denmark’s Ole Sohn, the minister for business and growth. The proposal calls for some 600 listed and non-listed firms involved in the extractive industry or in logging primary forests to disclose payments they make to governments in each country where they operate and for each project, said Internal Markets commissioner Michel Barnier. But while there was general agreement on the need to improve transparency, further discussion will be needed on details.

GAZPROM SAYS MEETING EUROPEAN GAS DEMAND, MAY LAUNCH PROJECT OF NEW GAS PIPELINES Gazprom, the world’s biggest natural-gas supplier, is meeting European requests for fuel in full after a cold snap this month boosted demand, Deputy CEO Alexander Medvedev said Monday (February 20). Medvedev said the past weeks revealed “systematic faults” in the European Union’s attempts to reform its gas market, as the spot market and renewable energy sources failed to meet increased demand. Moscow and Paris may launch a project to build new gas pipelines from Russia to Europe to meet the growing demand by EU states, Gazprom said in a separate statement.

EU SAYS IT HAS ENOUGH OIL STOCKS AS NATIONS CUT IRAN IMPORTS The European Union said the bloc is reducing the amount of oil it purchases from Iran and has enough reserves to face potential

NEWSLETTERS

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supply disruptions, even if the Persian Gulf country halts crude sales before an EU embargo enters into force on July 1. Some of the EU’s 27 nations have already stopped purchasing oil from Iran and others are buying less, according to Marlene Holzner, energy spokeswoman for the European Commission. Belgium, Czech Republic and the Netherlands, which bought a total of 2.38 million tons of Iranian crude in that period, have now stopped purchases and Italy, Spain and Greece are currently reducing imports, Holzner said.

MOL, GAZPROM GIVE UP ON GAS STORAGE INVESTMENT JV IN HUNGARY There will be no underground natural gas storage facility built in Hungary in a joint project by local fuels group MOL and Russian gas giant Gazprom. MOL and Gazprom have terminated a joint venture set up for the investment in Hungary,

MOL told state news agency MTI. The two companies teamed up in 2009 to explore the possibility of creating a natural gas storage facility. However, the feasibility study of the project had proved discouraging so the firms decided to abandon the idea, MOL said.

GAZPROM SEES FINAL INVESTMENT DECISION ON SOUTH STREAM IN NOVEMBER OAO Gazprom, Russia’s natural-gas exporter, and its partners on the South Stream pipeline to the European Union will make a final investment decision in November, the company said. Construction work is to start in December, Gazprom reiterated following a company meeting on the pace of work on the project. The South Stream gas pipeline is to be built across the Black Sea from Russia to Bulgaria with a capacity of up to 63 billion cubic meter per year. Commercial shipments are scheduled to start in late 2015.

POLAND’S FIRST NPP DELAYED, PGE TO INVEST INTO CLEANER POWER Poland’s first nuclear power plant will not come on line until 2025, five years behind schedule, according to press reports. The first reactor will go into service in 2025 and a second reactor in 2035, according to the PGE’s strategy for 2012-2035, the daily Parkiet reported. The supervisory board of PGE SA, Poland’s biggest power generator, has approved a strategy to invest more than PLN 9 billion ($2.84 billion) a year in 20122020 to boost its installed capacity and market share, while shifting to nuclear power and renewable energy sources, according to a regulatory statement.

CZECHS WON’T BUILD NEW NPP, HOSPODARSKE SAYS Czech Republic won’t build new nuclear power plants and instead plans to expand its existing capacity, abandoning the envisaged construction of as many as 18 new reactors, Hospodar-

ske Noviny reported, citing a minister. A realistic plan is to build two new reactors at the Temelin power plant and extend operations of the Dukovany station until 2035, the newspaper said, citing an interview with Industry and Trade Minister Martin Kuba.

ENERGY UNITY NEEDED, OETTINGER SAYS Gunter Oettinger, the energy commissioner for the European Union, said member states weren’t as committed to a unified energy market as they should be. Oettinger has called on member states to coordinate political capital with the aim of setting blocwide energy policies by 2014. An insider in the renewable energy sector, however, told EurActiv that national leaders weren’t likely to give up authority over national security issues like energy policy. The EU outlined in 2011 a road map that calls for “decarbonizing” the regional economy by 2050.

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6 MARKET WATCH

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Budapest Business Journal | Feb 24 – mar 9

Uncertainty worries expats in Hungary According to a joint study conducted by Dr. Pendl & Dr. Piswanger International HR consulting, the Budapest Business Journal and the Joint Venture Association,

the economy was good, and the number of those answering “very good” was marginal. But when it came to the prospects of their own companies, expat managers saw the future a little bit brighter. Only 30% said they thought their company’s prospects for the next six months were bad, nearly 40% were neutral, and 23% thought their prospects good. At the opposite ends of the spectrum, 3.3% saw their company’s outlook as very good and 4.9% as very bad. Expat managers view Hungary as one of the least attractive investment targets in the Central and Eastern European region. Poland topped

When asked whether they planned investments or developments to increase their headcount, 61% said no, 16% said they planned layoffs and 23% answered that they would be hiring new workers. CAUSES OF WORRY If you think that the continuing global crisis must be causing the biggest headache for expat company leaders, you would be wrong. Nearly 60% of them named unpredictable government and political decisions when asked what they saw as the biggest challenge to economic growth in the next six months. Only 13% voiced

THE BIGGEST CHALLANGES

ailing export markets ailing domestic markets unpredictable government and political decisions currency issues continuation of the global financial crisis state finances other

What do see as the biggest challenge for the growth of the Hungarian economy in the next six months?

taxation and bureaucracy, were named by another 5%. The survey underpins a tendency the Budapest Business Journal wrote about a year ago, namely that the process of replacing expats with top local executives in the corporate sector is very slow. Nearly 60% of expats said their companies didn’t plan to swap foreigners with Hungarian executives, and only 20% said they knew for a fact that such changes in management would be carried out sooner or later. When asked what the advantages of employing expats versus locals were, the most often mentioned answer was that expats have better connections with the parent company (39.8%). That expats have a wider range of experience and more thorough professional knowledge was mentioned by 32.8% and 26.6%, respectively. Better management skills were brought up by 32.8%, while better acceptance on the local market was only important to 6.6%. While this was not listed among the options, many respondents said that the ability to mix Western and Central European knowledge makes expats better managers than locals. Some also think that expat managers sport a better global overview on management and market issues. BUT WILL THEY STAY?

more than 60% of respondents describe the prospects of the Hungarian economy over the next six months as “bad”. About as many people answered with “very bad” as many remained neutral, at 16.4% each, while only 5% thought that the outlook for

the list, gaining an average of four points on a scale of one to five; Czech Republic and Slovakia followed with 3.3 and 2.9 points, respectively. Romania scored the same as Slovakia, while Hungary lagged at the bottom of the list with only 1.8 points.

concerns about the global crisis, while ailing domestic markets and state finances each worried 8.2% of respondents. Nearly 5% said they were upset about currency issues and 3.3% saw poorly performing export markets as the biggest challenge. Other issues, such as excessive

The survey also provides a snapshot of expats’ media consumption habits. Not surprisingly, nearly all (93%) of those questioned said they looked at the internet as the number one source for daily news – obviously, as this is the easiest way to learn about news from their homelands. As this was a multiple-choice question, 54% said they also watched television to gain information; 34% read print media, and only 15% listen to the radio. Expat managers also ranked the country’s services. On a scale of one to five, health care services received the lowest rating, with an average of 2.31. Traffic and transportation were ranked somewhat better, having reached an average of 3.26 points. School services received an average score of 3.34, while housing and shopping possibilities got 3.56 and 3.66, respectively. Expats have a good opinion of cultural opportu-

THE PROSPECTS OF INDIVIDUAL COMPANIES

How do you see the prospects of your company in Hungary in the next six month? 1=very bad; 5=very good

EXPAT ADVANTAGES wider range of experience better connection with the mother company better management skills better acceptance on the local market more thorough professional knowledge other

What are the advantages of employing expat managers versus local ones?

nities such as theaters, cinemas and museums: this area was awarded the highest score (4.11 on average). But will these values be enough to tempt these people to stay in Hungary? According to the survey, the picture is quite colorful. Only 23% of expat managers said that they would definitely leave the country after their contract expires. About one-third of them said they would like to stay on longterm, and more than 45% said

they didn’t know what the future would bring for them. Summarizing the fairly pessimistic findings of the study, András Lipcsei, managing director of Dr. Pendl & Dr. Piswanger, thinks that culture might be a potential breakthrough point for Hungary. “It would be worth focusing on culture issues in the country’s image, and developing tourism into cultural directions might be a profitable investment,” he said. PF

THE PROSPECTS OF THE HUNGARIAN ECONOMY

How do you see the prospects of the Hungarian economy in the next six months? 1=very bad; 5=very good

Source for all charts: JVSz-BBJ

Unpredictable government decisions and uncertainty in politics are the main worries for expat managers in Hungary these days. Most think that the economy will not improve any time soon.

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FOCUS 7

Budapest Business Journal | Feb 24 – mar 9

Watchdog & yellow External pressures often hurt a newspaper’s objectivity. Objectivity is an ambitious media goal, truly something worth striving for. However, it is often compromised, though not intentionally. The reasons for not being entirely objective are complex, as much of the time, professional rules and outside pressures will shape the story. “When we choose topics for the upcoming issue, we want to make an impact and sell the newspaper,” explained Bálint Ablonczy, a journalist for political weekly Heti Válasz. “I am sure there are newspapers that look at journalism as a form of civil war. But it is not politics that drive journalists in the first place.” Still, many people are under the impression that newsrooms have hotlines to political parties and follow instructions received from above. Fortunately, this is far from reality. The main drivers of the media are instead the number of copies sold or the audience figures reached. These determine everything from the topic chosen to the genre used. Yes, there is outside pressure. But contrary to what many believe, this is more often the case for those covering the economy than for journalists on the political beat. Even these attempts at exerting pressure are very smooth. “You rarely get threatened; you may get lunch invitations and inquiries about how the material is coming along,” Ablonczy explained. “If a newsroom or editors have your back, you will be confident enough to continue,” he added. If journalists write in support of one political side, it is because they identify more with its general beliefs. So those who believe in liberal values will likely agree with the arguments of a more liberal cabinet, while conservatives tend to lean more toward the right wing. But their beliefs should not prevent them from studying a topic from all angles. Clearly, it does not hurt to have a preconception of a story before someone starts reporting it, but as events unfold that must be adjusted. Thanks to pluralism, the most seri-

ous scandals will come to light eventually, regardless of which side committed it. The presentation of such delicate issues has changed significantly as the global and Hungarian media has evolved. “Right after the

change of the regime is when we can talk about a more factual press whose chief aim was to inform,” Gergely Kitta, senior researcher and media expert at Századvég Alapítvány told the Budapest Business Journal. With

the arrival of commercial television channels, presenting the hard facts was no longer enough. “Competition tightened as more players entered the scene. Narration, rather than facts, was given greater emphasis.” The

same piece of news from a newswire would be narrated in various ways, in line with the desired impact. Lack of objectivity and credibility are no longer contradictory terms. In fact, by not serving its usual reader-

ship or audience a media outlet will often lose credibility. “Were HVG to use a gossipy tone or Blikk to switch to hard facts, both would lose their trustworthiness to their readers,” Kitta explained. When it comes to scandals, especially political ones, all the above factors come into play. And the watchdog role of the media also strengthens (though not always proportionally) on each side. This results in the “slightly” different presentation of a story and a confused audience. In order to get a clearer picture of any ongoing story, you still need to buy two newspapers or watch two news programs at night. Another significant change is that people’s stimulus threshold has increased significantly. “What caused a great uproar 15 years ago barely leaves an impact today,” said Ablonczy. “This is a downside of the pluralist media.” The problem, according to Péter Zsolt, a media expert, started back in the 1990s. As different media outlets tried harder to please audiences close to a chosen political side, they were losing readers with general sympathy and objectivity. “The media reached the bottom in the late 1990s and the early 2000s, when reporter clubs invited journalists whose opinions were identical. There have been attempts to get out of this vicious circle, but most failed as readers expressed their disagreement,” said Zsolt. They are a minority, but no medium can risk losing its most loyal supporters. Still, even today many try and break out, Zsolt explained, and you can see some reporters purposefully representing views that are counter to the medium’s stance. The expansion of online news sites and citizen journalism may have blunted this process with its straight talk for a while. But pundit pages seem to have taken sides too. “Centralizing supervision over the media, the recent practice of the government, is not a good direction,” Zsolt believes. He prefers asking for feedback from everyone in an institutionalized form so they have an effect. The media has to listen to what its audience wants but should also set an example, explain and guide – all with good intentions. ZSV

A T E G E V E A WH T R 8 FOCUS

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Budapest Business Journal | Feb 24 – mar 9

TOC SIKGATE

AGEN T CASES

e t charges after th ion to the agen nt te e at th d te on ca re di edia that de t moral pressu s e few Western m of the Fidesz pu ea th t dr of en e id An , on es er pr as ev e w w th itung essy was). Ho e sacrifice of gy th ed at M th Neue Zürcher Ze d PM an ve th d, lie s lve rned in les nally invo korni. NZZ be era: Pokorni retu ni was not perso resignation of Po that it was all op to resign (Pokor 02 er 20 ist 4 in ly . M Ju e up on im co eful party socialist Pr le, could not know asons in a peac s on postponing thor of the artic tally different re untry that keep to r co fo e Oplatka, the au n th io of sit from re po s ilu tworks pop up gyessy lost hi the moral fa a year and Med ives and spy ne case studies for at en er with , be op s ps t ay ou ou w gr al ab st s have ical intere . Scandals Agent exposure e service of polit ment of its past th ss se in s, as es ed el as rth bi n, neve a proper and un the edia on a missio dals are used by is watchdog m . nt time to time. It ne sensational scan po e or op m an e th ize y, on or m de into hist the intention to 90 drift farther and the late 19 . ds As time passes n en rties for their ow hypocritical pa

The first land mark politica l scandal expl administration oded in parli of Gyula Horn. ament during Law yer Márta for her services, the socialist Tocsik invoiced which inspired a HUF 800 millio op po in what were sition Fidesz M n success fee years of auster P Ta m ás De utsch to questio ity measures. M hold of power n the figure any believe th in the 1998 elec at the socialists tions because the financial sh failed to keep of the Tocsik ca enanigans of th se, a typical na e rich and pow weight of econ rrative about erful while the omic burdens. ever yman stru Right wing med investigation. To ggles under th ia enthusiastica csik was eventu e lly reported the ally acquitted in progress of the 2003, but could keep only HUF 80 mln.

1996 1997 997

1990

SPEECH OF PM GYURCSÁNY

D-209 GATE Not more than three we eks after his inaugurat ion, Socialist Party Prim Medgyessy was uncovered e Minister Péter by the right wing daily Ma gyar Nemzet, which identifi Agent D-209, a field ope ed him as rative of the III/II departme nt of the ex-communist 1977 and 1982. Even tho regime between ugh the department eng aged in economic and ind Magyar Nemzet, faithfu ustrial espionage l to the recently defeated center-right Fidesz govern to demonize the new pre ment, intended miere.

PÁ KOZDIGATE

this ic who leaked e p bllic os ryy to the pu er te ch ys ny m sá a rc ill M Gyu It is st PM n--P then e as , ad hy tir w flagellating lf-fl speech and give a seellfs ie to lic s ds po or y w ar l budget unfiltered ible n ns po es irr 00 d s an 2004-2 6 about the lie ion between trattio is in m ad t leisure us of his previo hee governmen d doors off th ed se os ctorious cl vi e e th th behind usstt after n, ju ton la Ba ke La ned countryestate next to a a state-ow ct that fa e Th . of which ns tio 2006 elec om a budget t, financeed fr le tle ut ation to ou lig ia ob ed e m wide n rol,l felt th nt co d ha sm is t en nyy’’ss self-critici án the governm urrccssá out Gyu ab n tively io tio ea at cr na e e th inform th o bad that To . s. es e pr ee fr hee became mor a victory for th t e speech th of d s te ns on en io si rs es er pr ve shortened o ed them thor utth o au e who os th d an r popula g. watchdogs themselves as

We will never learn wheth W er the Pákozdi case was a Soc ociiali alisstt cou c nte t D-209 scandal, or a mo the t r attack after re genuine watchdog hun t for right wing hypocrisy. No doubt, “the governme N nt of networks”, as Fid esz tagged the Socialist administration, hinting on ad a underground conspiracy theories, had profited from the th he report of a medium size d TV-channel, Budapest TV, which unveiled that a high ranking opposition pol h itician had an agent in his/ her family. The code name off the t ex-agent was Pákozd i, a common enough Hunga rian name, but special eno en nough to make Zoltán Pok orni, then-president of Fid esz, suspicious and call his fa fath ather who confessed his pas t. Pokorni resigned from his position in a public and em emo otionally-charged speech .

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FOCUS FOCU S 9

Budapest Business Journal | Feb 24 – mar 9

We all love scandals. Media must sell their products, so they deliver an amphetamine for the boring everyday. A special trait of the Hungarian scandal market is that the more infuriating public cases tended to reach the audience via watchdog media rather than the cheaply entertaining channels. The key that unlocks the mystery of the oxymoron lies in the pockets of the politically affiliated publishing directors and editors in chief. They use their portfolios as the polygraph of the opposition, whomsoever that might be. As a brief history proves, this role has become stronger from year to year. PF AR

E T A G K N A B PO STA

alist ring the soci parliament du in s fee es ed cc su od n pl io ex ill HUF 800 m a ical scandal d lit ice po vo k gure in ar fi ik e m question th r Márta Tocs The first land ás Deutsch to a Horn. Lawye m ul Ta keep Gy P of to M n d sz ile tio de position Fi administra socialists fa out lieve that the hich inspired op ab be w e y s, tiv an ice M rra rv s. se na r l re for he se, a typica erity measu st ca ik au cs of the To s r e ar de th ye un struggles ns because of in what were le the everyman the e 1998 electio hi th of w l ss in fu re er er w og w pr po po hold of e rich and reported the th lly of s ica an st ig ia us an . th en ia en F 80 mln the financial sh Right wing med uld keep only HU omic burdens. in 2003, but co ed itt qu ac weight of econ ly tual Tocsik was even investigation.

KULC SÁR GATE Also known as brokergate, faile d-businessman turned bank brok er Attila Kulcsár burst on to the news agenda when Károly Szász, head of the Hungarian Fina ncial Supervisory Authority was attacked and taken to hos pital. The news was contradicto ry. The martyrdom storyline of Szász followed the dramatur gical pattern of the righteous-m an-against-the-hoodlum: he intended to uncover fraudste rs at K&H Equities, so his enemie s had him beaten him up with baseball bats. It must be terri bly hard to hit somebody with a baseball bat so carefully that the following day he can hold a press conference, however, this time politically affiliated watchdogs were slow to catch thei r prey, and could only make thei r own interpretations of the story after Szász had already initi ated public grudges.

2002

2003

SPEECH OF PM ORBÁ N te conversation hoped that the priva Socialists and liberals tor Orbán with der, the right-wing Vik of then-opposition lea ung students yo the tist László Kéri, and his former teacher, lef Gyurcsány the to ect eff r ger a simila of the latter, would trig n. Orbán bá Or loss of credibilit y for speech: uncontrollable as prime ns tio ac ure some of his fut explicitly stated that g at hard ikin str res asu me austerity minister would be ported members er socially well-sup oth d an ers on pensi contrasted with te, va pri m, shared in of societ y. His progra sitiveness of the gogy about the insen the open social dema tion. Gyurcsány administra the fiasco. Kéri, w too much interest in sho t no The media did k and claimed s upset about the lea a lef t-wing thinker, wa could remain ion sat ver that such a con that he would expect his peers, who met criticism from private. His demand should be the rs posite: public matte expected just the op rse. matter of public discou

2006

2008

2012

PLAGIA RISM BY PRESIDE N T SCHMITT A genuine example of wh en watchdog media doe s its job. Weekly liberal Heti Világ Gazdaság (HVG) commis sioned an unnamed freelancer to investigate the genesis of the PhD paper of President Pál Sch mitt. The process had las ted for nine months when the sca ndal surfaced on the pag es of the magazine. The reactions were typical: society was infuriated; particularly those who intend to protect the val ue of their scientific achievements and studies. The plagiarism doe s not only shadow the trustabili ty of the head of state, but also the elite educators who not only awarded Schmitt wit h a PhD, but tagged his forger y as an epic achievement – sur ely it is, though perhaps not in the way they meant.

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Budapest Business Journal | Feb 24 – mar 9

BEYOND THE “PEST JOKE”

SARCASM AND DERISION JEWS ABOUT JEWS IN THE PESTI VICC Pest Jokes are deeply rooted in Jewish humor. And Jewish humor is rooted in traditions. In his brilliant joke collection, The Treasury of Humor, Isaac Asimov suggests that Jewish stock jokes, which pop up in thousands of variations, are actually the collective subconscious of Jewry, a living memory of almost 5,500 years of Jewish culture.

Hundreds, if not thousands, of books have tried to explain the quintessence of Jewish humor. Their authors mostly agree that it is essentially composed of “laughter through

tion, there are several others dealing with less melancholic topics… What all these jokes have in common, aside from a remarkable combination of earthiness and subtlety that appeals to common folk and

people making fun to such a degree of its own character.” Some of Freud’s followers have taken his observation and expanded it into a general insight into Jewish character. Nowak explains

JEWISH JOKES IN BUDAPEST

But if Jewish humor is so cosmopolitan and international, what is it that makes a Pest Jewish joke different from other Jewish jokes? After all, regular topics of Jewish jokes – scholars, rabbis, chutzpas, schnorrers and schlemiels; the eternal comedy of food, health and manners; business and family relations – are universal. These topics, naturally, are also present in Pest jokes,

In one of Brussels’ main squares, a huge crowd is gathering to demonstrate national identity. The police trying to separate demonstrators give instructions through loudspeakers: Flemish people please stand to the right. Walloons, please stand to the right. A fresh immigrant from Budapest, Kohn, taps the shoulder of a policeman. “Please Sir, and we Belgians, where should we stand?” tears” and that it arose out of the grimmest chapters of Jewish history, taking place mostly in Eastern Europe. William Novak and Moshe Waldoks, the editors of “The Big Book of Jewish Humor” (Harper Perennial 1981) challenge this view, claiming that the phrase wrongly emphasizes the humor that developed through suffering and implies that the Jew’s endless struggle with adversity provides its dominant theme. “The evidence suggests otherwise. For every joke about antiSemitism, poverty, or disloca-

intellectuals alike, is not that they are primarily sad or wistful, but that they are wise and – no small matter for 19th century humor – genuinely funny even today.”

Jewish humor is frequently selfcritical and sometimes even selfdeprecating. As Sigmund Freud noted in his book “The Joke and Its Relation to The Unconscious”: “I do not know whether there are many other instances of a

that, “according to this view, Jewish humor arose as a way for Jews to cope with the hostility they found all around them, sometimes by using that hostility against themselves.” Psychoanalyst Martin Grotjahn adds to this (“Dynamics of Jewish Jokes” – Berger, 1987): “Aggression turned against the self seems to be an essential feature of the truly Jewish joke. It is as if the Jew tells his enemies: ‘You do not need to attack us. We can do that ourselves – and even better…’.”

but the latter is much more charged politically. It reacts to actual events without delay and with embarrassingly clear insight. A Pest joke, even in the darkest times, can be a most dangerous weapon: it can ridicule political principles, discredit megalomaniac ambitions, and destroy carefully nurtured ideals and personal cults. In an autocratic, dictatorial regime joke telling on the sly is almost like a minor revolt, a sort of accomplicity between joke teller and listener.

One night after the German occupation, the Gestapo breaks into the house of Kohn. They pull him out of the bed and start off with two huge slaps in the face. “Do you know Schwarz?” “ No.” They punch him in the stomach and the face. “Do you know Schwarz?” “No I have never heard of him.” Kicks into the ribs. “Well, do you know Klein?” The half-dead Kohn in a faint voice: “Then I would rather know Schwarz…”

Jewish jokes flourished on Pest streets during the German occupation, although those, years when almost the entirety of Hungarian Jewry (600,000 people) perished, were not funny at all. With the liberation of Hungary by the Soviet army, Hungarian Jews may have been saved from total extinction, but, with their country falling into another form of totalitarianism, the few joke makers who miraculously survived the Holocaust again had a job to do.

In the early ’50s, the elderly Kohn goes to the Communist Party boss at the factory. “Comrade Kovács, I have made up my mind, I wish to emigrate.” Kovács is aghast: “But, Comrade Kohn, how can you say such a foolish thing?” “Comrade Kovács, in this country anti-Semitism rages again, I can’ t stay here anymore.” “But, Comrade Kohn, why do you think, anti-Semitism rages again?” “Comrade Kovács, I chose 100 names from the telephone directory randomly, called each of them and when they picked up the phone, I just told them: ‘All our problems are caused by the Jews and the bicyclists.’ “But why the bicyclists?” asked the Party boss. “Exactly, Comrade Kovács. They all asked the same question!”

There was, however a major difference: unlike German fascism, the communist dictatorship did not single out Jews as their common enemy. While formerly, Jewish jokes served mainly to cure the Jews’ own problems, in communist times Kohn and Grün (regu-

lar protagonists of Pest Jewish jokes) fretted and fumed on behalf of the entire society. Jews and non-Jews had the same difficulties to grumble about: the lack of basic human rights and civil liberties, dwindling intellectual life, constant shortage of commodities, and so forth.

In the 1970s and 1980s Hungary was known as “the most cheerful barrack” and not without reason. János Kádár, an exceptionally popular communist leader, made a clever deal with his people: if you accept one-party rule, the presence of the Soviet army and restricted press, in turn you can enjoy relatively free travel and access to goodies offered by consumerism. The people happily compromised and turned their own opportunism into a laughing stock in vitriolic Pest jokes.

The omnipotent First Secretary of the Soviet Union, Leonid Brezhnev pays an official visit in Hungary. Brezhnev is surprised that security agents do not surround them. “Look János, is it always like this, that you are just walking without security in the streets?” “Yes, Comrade Leonid.” “And aren’t you afraid that somebody would attack and hit you?” “But no, Leonid, in our country 95% of the people are honest citizens, they would never do such things.” “Well, how about the remaining 5%?” asks Brezhnev. “ Oh, the remaining 5%?” comes the answer. “They are bound by Party principles…”

In a true democracy political jokes lose their flavor. Kohn and Grün, with little Maurice and the other Jewish characters, calmed down after the collapse of the communist regimes and have remained quiet in the past two decades. But the current times, with the economic crises, mass impoverishment, the growing popularity of rightwing parties and increasing anti-Semitism, all raise the nightmare of the 1930s. Kohn and Grün have good reasons to be scared of a renaissance of Pest Jewish jokes. ASz

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SPECIAL REPORT ON TAX EFFECTS 11

Budapest Business Journal | Feb 24 – mar 9

IMF talks to bring further tax changes Due the speed of legislation last year, sev several corrections need to be made ma to the new tax regulations ulations. “In 2011, we saw regulatory adjustments to the tax system every fourth day on average,” Balázs Békés, regional tax par partner of Wolf Theiss Budapest Buda says. More profound changes c might happen as a resu result of external developments, ssuch as loan talks with the IMF or potential European court proceedings pr over some of the crisis taxes. There are several areas of taxation to be changed provided there th is economic growth in Hungary, Hung such as the reform of local taxes, a decrease in employe employers’ payroll taxes and the retur return of the bad debt relief in the V VAT system, PwC tax partner Tamás Lőcsei tells the Budapes Budapest Business Journal. “Under sstagnation or recession, we will certainly not see positive changes chan to the tax system. But I bel believe that a positive outcome of the infringement procedures and an agreement with the IMF could reverse some of the current curr negative expectations in Hungary,” he adds. NO ROOM FFOR MANEUVER “I believ believe the IMF will look at Hungary’s tax system in its own Hungary complexity and will make its complex recommendations accordingly, recomm rather than t singling out one or two measures,” m Lőcsei says, adding that he does not foresee maj major adjustments. Békés does not no expect revolutionary changes either. The regulator is not likely likel to launch conceptual changes, he stresses. changes The government g has practically n no room to maneuver in the aarea of indirect taxes, p Lőcsei points out. “The 27% standard VAT rate cannot be a further, while I do raised any not see a chance to increase the already high number of small taxes eit either.” “It wo would be very hard to convinc convince the government chan the corporate tax to change regime, as it is fully committed to the 110% corporate tax rate up to the first HUF 500 million of the ttax base,” Lőcsei says. “As to personal p income taxes, the IMF IM might recommend making the tax more progres-

PAYMENTS SECTORS IN 2012 (HUF BILLION) STATUTORY TARGET

MNB

DIFFERENCE

Corporate income tax

356

304

-52

Surtax of corporations

Fees of financial institutions

PAYMENTS BY BUSINESSES

Special tax of financial institutions

187

186

-1

Sector-specific taxes

155

160

Simplified entrepreneurial tax

225

147

-78

Green taxes

-2

Mining royalty

Gambling tax

-23

Other payments

0 -16

Other centralized payments

179

163

Income tax of energy companies

Company car tax

-10

1401

1229

-172

-48

TOTAL

CONSUMPTION TAXES Value-added tax

2718

2670

Excise duties

898

905

Registration tax

3630

3593

-37

1574

1552

-22

103

-9

1677

1646

-31

TOTAL

PAYMENTS BY HOUSEHOLDS Personal income tax Fees and duties Other taxes TOTAL

sive. However, the government will likely stick to the 16% flat rate and – if cornered – would try to introduce some kind of solidarity tax instead,” he added. According to Economy Ministry state secretary Zoltán Cséfalvay, the philosophy of the flattax regime is hardly likely to be criticized by the Fund, since the financial institution was also built on the foundation of the free market economy and flat rate systems are in effect in several countries in the region. Cséfalvay explained that until the real 16% flat rate regime comes into effect on January 1, 2013 a second rate also exists this year, pointing out that there is a wage compensation system in effect too. IMF CONCERNS In an interview with IMF Survey online, Christoph Rosenberg, the IMF mission chief for Hungary, said that the specific design of the flat rate tax in Hungary, along with some of its accompanying policies, have had less than optimal economic outcomes, have added to bureaucracy, and have overly burdened the most vulnerable. These policies include the elimination of the basic tax allowance, an 18% hike in the minimum wage, a complicated system of wage recommendations and compensations for employers, an increase of the standard VAT rate to 27% and excise tax hikes. The IMF’s concern is that “all this will lead to real income losses and reduced employment opportunities for lower-skilled workers and

it will make doing business in Hungary more complicated and less attractive”. Rosenberg also criticized the special taxes in the retail, energy, communication and banking sectors, which are predominantly foreign-owned. He said that these levies have negatively affected the business climate. PROPERTY TAX? “Introducing a property tax might be an idea to consider in the future,” Lőcsei says. “However, due to past failed attempts to launch such a tax, this is a tight spot for the government.” Békés agrees that the government is not likely to introduce a property tax this year. He believes that it makes no sense to introduce a luxury tax, and a mandatory tax would result in an impossible burden for many troubled homeowners. In 2006, the government then in power introduced a luxury tax for properties with a value of more than HUF 100 million. Property owners had to pay the local municipality a 0.5% on that part of the home’s value exceeding HUF 100 million. The 2010 tax package amended this by imposing a new tax on high-value property, which included residential and recreational real estate, high-performance cars, watercraft and aircraft. The Constitutional Court, however, repealed provisions on real estate in January 2010, while keeping the provisions on other types of properties. The new government, in turn, scrapped the wealth tax altogether in July 2010. GL

Source: Analysis of the 2012 Budget Bill (update) by the MNB

Hungary might see further amendments amend to the tax system during 2012, including minor min corrections to earlier regulations as well as ch changes brought th IMF talks, tax on by external pressures such as the experts have told the Budapest Bu Business Journal.

12 SPECIAL REPORT ON TAX EFFECTS

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Budapest Business Journal | Feb 24 – mar 9

Hungary’s tax system in Europe With a total tax-to-GDP ratio of 39.5% including social security contributions, Hungary’s tax burden is well above the EU average of 35.8%, based on 2009 Eurostat figures. In neighboring countries, Austria has a higher tax ratio, but Slovenia’s is lower and both Slovakia’s and Romania’s ratios lie well below that of Hungary. Revenues from indirect taxes are substantial, their share accounting for 42.1% of the total, Eurostat said. VAT revenues yielded 8.4% of GDP, which exceeds the EU average by one percentage point. Other taxes on products are the highest in the EU, at 3.9% compared to the EU average of 1.3%. Eurostat attributes this primarily to local business tax revenues. In contrast, direct taxes are relatively low, at 9.8% of GDP compared to 11.5% in the EU. Social contributions as a percentage of GDP are above the European average, at 13% versus 11.1%. Eurostat points out that while central government remains by far the largest recipient of tax revenue, with more than half of the total, local government taxes are, at 6.7% of total taxation, not negligible. Local taxes grew rapidly until 2004 and since then have been showing a decreasing trend. The overall tax burden declined gradually between 2000 and 2006 from 39-37.3%, then quickly reached 40% in 2008 as a result of a public finance consolidation. Despite the -6.7% real GDP contraction the total tax-to-GDP ratio dropped only 0.5 percentage points in 2009, partly due to an increase in VAT revenues. CORPORATE TAX Since the end of the 1990s there has been a strong trend towards lower corporate tax rates in Europe. The downward trend is ongoing, with rate cuts in six

OVERALL TAX-TO-GDP RATIO (2009, %)

42.7

FINLAND

46.9

SWEDEN

35,9

ESTONIA

26.6 48.1 28.2

LATVIA

LITHUANIA

DENMARK

38.2 43.5 37.1

31.8

NETHERLANDS

POLAND

GERMANY

BELGIUM

34.5

LUXEMBURG

48.1 37.6

39.7

CZECH REP.

AUSTRIA

41.6

FRANCE

43.1 31.0

29.3

IRELAND

UKRAINE

SLOVAKIA

HUNGARY

34.9

28.8 39.5

SLOVENIA

ROMANIA ROMAN

27.0

BULGARIA

28.9

ITALY

Source:Taxation trends in the European Union by Eurostat

PORTUGAL

SPAIN

GREECE

30.4 34.4

countries during the last two years including Czech Republic, Greece, Hungary, Lithuania, Slovenia and the United Kingdom. As a result, the average corporate tax rate in the EU-27 has fallen to 23.1%. In this context Hungary has an established position as a low-tax country, given that it introduced a corporate tax rate of 18% in 1995, according to Eurostat. The rate was further reduced to 16% in 2004. Although on January 1, 2010 a broader tax base was introduced and the tax rate was increased to 19%, the 4% solidarity tax was scrapped. Thus, the effective tax burden was lowered further by approximately one percentage point. A tax rate of 10% is still applicable to income below HUF 500 million as of 2011. Eurostat foresees an increasing level of taxation in the EU in the medium-term.

Budgetary consolidation is needed to bring government deficits down to sustainable levels, and this consolidation is likely to be carried out not only through cuts in public expenditure but also by increasing taxation. Eurostat notes that little has been done to increase housing taxes, even though research shows that they are amongst the most growth-friendly taxes. PERSONAL INCOME TAX In most EU member states the personal income tax contains several rates. Twentyone countries cut the PIT rate, whereas only two countries increased it. The biggest cuts took place in five countries that moved to flat-rate systems: Bulgaria (-40 percentage points), Czech Republic (-28), Hungary (-23.7), Romania (-24), and Slovakia (-23).

30.3 CYPRUS

MALTA

In 2011 Hungary introduced a flat rate tax system at 16%. Employers’ social security contributions (27%), which have been included in the tax base since 2010, will be gradually phased out of the tax base by 2013. VAT In the wake of the crisis, VAT rates have grown strongly in Europe. VAT standard rates have often changed from 2009 onwards, in the vast majority of cases upwards. The speed and extent of the growth is impressive, with 2.2 percentage points on average in just three years. Another remarkable aspect of this trend is its rapid spread to a large group of countries. Only one country changed the VAT rate in 2008, followed by six in 2009 and nine the following year. The trend continued in 2011.

35.1

CHANGES IN VAT STANDARD RATES BY COUNTRY, IN % POINTS

2008

Portugal -1

2009

2010

2011

Estonia +2

Czech R. +1

Latvia +1

Ireland +0.5

Ireland -0.5

Poland +1

Latvia +3

Greece +4

Portugal +2

Lithuania +1

Spain +2

Slovakia +1

Hungary +5

Lithuania +2

UK +2.5

UK -2.5

Portugal +1 Romania +5 Finland +1 UK +2.5

The standard VAT rate in Hungary increased to 27% from 25% at the beginning of 2012. The lower VAT rates of 5% and 18%, however, remained unchanged. Excise duties, the other main class of consumption

taxes, showed an increasing trend too. Eurostat notes that indirect taxes typically are less of a drag on growth because they are less distortionary and do not have a direct impact on foreign competitiveness. GL

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SPECIAL REPORT ON TAX EFFECTS 13

Budapest Business Journal | Feb 24 – mar 9

Taxpayers face closer scrutiny in 2012 Taxpayers will face closer checks and tougher sanctions from the tax authority in 2012. But how will the authority cope with its new responsibilities? While the national tax and customs authority, NAV, received 85 new tasks this year, the government in January announced plans to eliminate 577 jobs at NAV, under a government decree to cut a total of 6,719 public service jobs. According to economy minister György Matolcsy, only 48 NAV employees will actually be laid off, while 529 currently unfilled positions will be scrapped. In addition, an immediate hiring freeze was imposed as of January 12. NAV currently has 23,000 employees. In 2012, NAV aims to secure tax revenues of HUF

porate taxpayers and 4.5 million individuals submitting personal income tax returns. But NAV has not received extra funding to accomplish the additional tasks it received for 2012, the agency told the Budapest Business Journal. Thus, the only way to reach the revenue target is by reorganizing its workforce and doing significant extra work. The authority expects to see the first results of the new opportunities provided by the new regulations at the end of the first quarter at the earliest. In the first two months of 2012, NAV was preparing for the significant changes in regulations. TAXPAYERS BEWARE!

10,500 billion, or more than 92% of total central budget revenue. This is HUF 1,000 billion more than last year, and it aims to achieve that fig-

ure by broadening the taxpayer base, according to deputy president Árpád Varga. NAV has about 4,000 auditors scrutinizing 1.6 million cor-

NAV aims to use new means and methods facilitated by the new regulations entering into force in 2012. Under the new rules, auditing taxpayers carrying ‘high risks’ can be carried out more efficiently. With the new tax registration procedure, the author-

ity hopes to prevent the establishment of risky companies. Under the increased authority control, NAV is entitled to place a registered company under close scrutiny at the beginning of its operations as well as for a certain period following a change in its ownership structure. New developments in risk management include the right to use publicly available (including online) information, which will help the authority to find businesses and individuals presenting high risks from a taxpaying point of view. Another method is trial purchases made by NAV, which ensures a broader tax authority presence as well as another way to gather information in order to make further potential audits more efficient. NAV believes that it can exceed last year’s results by exploiting the benefits of the integration of the tax and customs organizations and the criminal area. Thus, the

authority aims to continue the audit of bigger malls, markets and luxury providers, NAV noted. DECREASING TAX ARREARS Tax arrears had dropped by 2.5% by the end of January from the end of last year. NAV aims to increase the number of enforcement actions to collect debt. However, given the current economic environment, the authority says it will pay special attention to acting in a fair manner with troubled taxpayers, such as SMEs struggling with temporary payment difficulties. Tax arrears reportedly totaled HUF 2,215 billion at the end of last year. NAV’s main task is to ensure resources for public expenditure and the collection of taxes allocated by the Budget Act. Making the most of the assets at its disposal, the authority says it is working continuously to promote proper tax payments. GL

[ EXPERT OPINION ]

As early as the dawn of the 20th century, the chief prosecutor in the famous novel Rokonok (“Relations”) by Zsigmond Móricz said that “there is but one problem in Hungary, and indeed, an enormous problem: the people of Hungary do not like paying taxes ... no one does”. People still find that taxation is a kind of forced deprivation from property without any direct service in return, instead of thinking of taxes as their contribution to the production of public goods for the overall benefit of society. Support for taxes is even more weakened by the fact that certain groups of society simply avoid taxation, thereby leaving the ordinary taxpayer to bear the public burdens disproportionately. Selfemployed persons (self-employed entrepreneurs and members of business associations directly participating in the work of such associations) account for some 14% of the entire working population, who refuse to bear any additional tax burden and pay only a disproportionately low amount of taxes and other contributions in comparison to other persons working as employees in similar positions. It seems to be a fundamental drawback for the Hungarian tax regime (the smaller the company, the more typical the problem), that actors in the private sector still react with breathtaking urgency even to the smallest regulatory changes. Any disadvantageous tax related change leads to the re-emergence of illegal and unregistered employees and ignites a quest for finding any loophole in the system. The recent statutory changes of 2012 to the tax regime certainly include various elements that may cause negative reactions from the market. Value added tax rate was raised by 2% from 25-27% as of 2012, and Hungary assumed a “leading position” in the European Union by introducing the highest VAT rate among the Member States. The high tax rate, in turn, may provide an incentive for not paying taxes and never to take out the invoice books from the drawers, thereby increasing the volume of hidden consumption among companies and end consumers. At the end of the day, it may result not only in loss of revenue from value added tax for the budget, but may also affect the personal income tax revenues. Furthermore, the laws of 2012 had a significant impact on the system of personal income tax as well. One of the changes affecting a large group of employees consists of the phasing out of the tax credit. Until 2011, the income of a natural person receiving low wages from an employment relationship was exempted from taxation. The monthly savings of such persons could be as high as HUF 12,100 if the total income of the natural person did not exceed the eligibility limit. In order to avoid any reduction in the net wage of the persons affected by the change, the amount of the statutory minimum wage was increased and the institution of the expected wage increase was introduced. The expected wage increase means

a quasi-mandatory statutory increase in salary, where the decision to give any raise remains with the employer, but employers pursuing business activities may lose the privilege to apply for public tenders, to receive state subsidies, or to receive aid from earmarked state funds. However, no other penalty or fine may be imposed in the course of labor law inspections. Such a wage increase is to be granted to employees, the gross salary of whom did not reach HUF 216,805 during the reference period. Both the expected wage increase and the increase of the statutory minimum wage imply the possibility of tax avoidance, as most of the employers are not in a position to assume the additional burdens of a wage increase. On the other hand, losing the above privileges may jeopardize the very operation of businesses. Experience shows that undertakings typically react to an increase in the statutory minimum wage by fine tuning part-time employment – for example, by declaring less than actual working hours. One of the most important “mistakes” in the taxation related changes of last year is the amendment of a very high number of laws, leading to utter confusion concerning the applicable amendments. We found taxation related amendments in various acts even at the very last moment, where such amendments were least expected. For example, the extension of the deadline for disbursing VAT refunds and the deadline for disbursing the tax-free employer’s support for the FX repayment at discounted exchange rates are set forth in the Act on Investment Fund Managers and Collective Investment Forms. Finally, to close our conclusions on a positive note, we need to mention that two additional means (the tax registration procedure and the enhanced tax authority supervision) were granted to the tax authority to strengthen the powers of the authority. The new procedures allow the tax authority to exclude companies established for the sole purpose of tax evasion, prior to assigning a tax number to such companies.

To read more from our experts follow us on LinkedIn, Facebook, visit our blog or subscribe to our newsletter: www.ucmsgroup.hu Andrea Bodnár Statutory Compliance Advisor, Tax Advisor UCMS Group Hungary Kft

Andrea Bodnár graduated from College of Finance and Accountancy and later obtained the Chatered Legal Economist degree at University of ELTE. She has tax advisor qualification and regulary teaches at College of Finance and Accountancy. She is author of several professional publications.

NOTE: ALL ARTICLES MARKED EXPERT OPINIONS ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILITY

Impact of tax changes on tax morale

WWW.BBJ.HU

14 SPECIAL REPORT ON TAX EFFECTS

Budapest Business Journal | Feb 24 – mar 9

Paid to be alive There is much perplexity on the market about expected wage hikes and their compensation, suggesting it was rather unexpected for most of the companies concerned. But making it a condition for entering public procurement tenders seems to be a good motivator.

The elimination of the tax credit for personal income taxes affects people on the lowest income. In order to keep the real value of their wages, the Hungarian government decided at the end of last year to advise companies to pay an “expected wage increase” to these employees. The 2012 tax laws, including that on social security contributions, stipulate that all workers who were employed any time between October 1, 2011 and December 31, 2011 and whose gross wage was lower than HUF 216,805 should be compensated. If the wage is higher than HUF 59,600 gross, the measure of the increase should be between HUF 15,500 and HUF 500. If the wage is lower (e.g. for parttime employment), the extent of the compensation is 26% of the monthly salary. Employers also get compensation for their cooperation, namely a tax allowance – its exact conditions are regulated by a government decree. If a company raises all wages concerned (and not simply by giving more fringe benefits), it is eligible for this compensation. Together with the act, this keeps the costs of the rise for the employer at no more than 5% in case of unchanged net wages for employees. For the minimum wage, the expected wage hike does not mean new expenditure for most, besides the obligatory raise in the wage type itself. In 2012, the monthly minimum wage has risen from HUF 78,000 to HUF 93,000 – with the expected

wage rise, it would be HUF 92,700. As for the guaranteed wage minimum (for employees with high-school diplomas or professional skills), the previous HUF 94,000 must go up to HUF 108,000, which means again a meeting of conditions, with the expected rise being HUF 107,800. If the employer doesn’t fulfill these requirements, there are several negative consequences. Firstly, the company risks its eligibility to participate in public procurement tenders for two years and to receive state subsidies. If it does apply for a tender, and the tax authorities find any deficiencies during a regular check-up, the employer has to repay all tax allowances with a fine of up to 200%. Experts say it is best to give particular attention to documentation, because the authorities will make these check-ups a priority. MODERATE RISK FOR COMPETITIVENESS Whether this is a gallant offer from the government is still being disputed; however, there are definitely some cases when complying is an advantage. First and foremost, companies interested in public procurement tenders have raised or will raise the salaries of at least two-thirds of their employees, which is the bottom line for the rise. Moreover, it costs even less to raise it for all employees because the company can apply for the social contribution tax credit, and about 10% of costs are covered by the state budget. Otherwise, keeping the real value of net wages for employees who earn less than the average “would mean a 15% gross wage rise, all paid by the employer”, noted József Angyal, a chartered tax expert for Adózóna.hu. However, there are several problems with the compensation system. Most advisors the Budapest Business Journal spoke to mentioned the increased administrative burden stemming from the complicated regulations. Different shifts or overtime work that vary from month to month add to basic wages and make eligibility for compensation hard to define. Where thousands work for lower wages, as in manufacturing or assembly, even that

MINIMUM WAGE 2011 (gross) 2012 (gross) cost of the employer in % tax credit of the employer HUF

78,000 93,000 5.2 13,647

GUARANTEED WAGE MINIMUM 2011 (gross) 2012 (gross) cost of the employer in % tax credit of the employer HUF

94,000 108,000 5.1 11,533

EXAMPLE FOR PART-TIME JOB 2011 (gross) 2012 (gross) cost of the employer in % tax credit of the employer HUF

100,000 113,500 5.1 10,735

EXAMPLE FOR FULL-TIME JOB

200,000 2012 (gross) 204,000 cost of the employer in % 2.00% tax credit of the employer HUF 0 2011 (gross)

3%-4% of additional costs count a lot, not to mention that in 2013 this will further increase because of decreasing compensation rates. Nonetheless, “this very important GDP-generating segment in Hungary is already suffering the effects of the compulsory minimum wage rise, so with the compensation they at least have the chance to reduce their losses,” Ferbal Auditing & Consulting managing director Lajos D. Nagy said. “Some of our clients, mainly international enterprises, have not taken any action yet, they might still be in the process of negotiating with their parent companies,” added András Szalai, managing director of Process Solutions. Compensation can be claimed retro-

actively, and time is needed for the exact calculations and necessary restructuring of business plans. PART-TIME SUCCESS In those plans, restructuring of the workforce will probably be a major issue. While experts do not predict mass layoffs, there will definitely be some headcount reductions, and even more previously full-time workers will be offered part-time jobs instead. “The compensation is more advantageous for parttime employment, so companies will be restructuring their workforce toward that,” said D. Nagy. The compensation for the expected wage rise is 21.5%, with a maximum of HUF

16,125 for wages under HUF 75,000. For wages higher than that, the zones go up by 14%, up to HUF 190,000 gross. Salary cost-driven sectors, such as manufacturing, hospitality or construction, in order not to jeopardize their competitiveness, are already trying to cut labor costs by dismissing people and enhancing production efficiency. In practice, this might mean an eight-hour employment turning into a six-hour one, but only on paper. Angyal also called attention to the fact that even if the employer does comply with the expected wage hike measures, the jobs of its workers still will not be ensured. After a layoff, the employer can hire new workers for the same low wage as before the hike, while the company again gets the tax allowance – even more than for the laid off worker, because a lower wage means a higher allowance. From another perspective, the circle of employees that make an employer eligible for compensation has been widened, compared to those

who were eligible for tax credit in 2011, giving again room for creativity in the books. A typical example is the case of a managing director at a Hungarian SME, who is employed by his own company with a gross wage of HUF 100,000, but has other revenues like dividends, or sale or rent of a real estate. In 2011, this person was not eligible for a tax credit, but this year, according to the gross revenues coming from the employment, his company can apply for a wage compensation tax credit. Additionally, in every position, the monthly salary can be “complemented” by commission work or another part-time job. Those paying taxes through EKHO (a regime of simplified contributions to common charges) are also automatically eligible for compensation after their minimum wage. Although the goal of the new regulation would be to keep wage-type revenues in the legal track, there are some sectors in which reaching this goal is at risk, noted Szalai of Process Solutions. AJM

WWW.BBJ.HU

SPECIAL REPORT ON TAX EFFECTS 15

Budapest Business Journal | Feb 24 – mar 9

Tax consultants

THE BBJ’S BOOK OF LISTS CONTAINS 100+ SECTOR-SPECIFIC LISTINGS OF LEADING COMPANIES. THE BOOK OF LISTS COMES FREE WITH A BBJ SUBSCRIPTION, OR CAN BE ORDERED SEPARATELY BY E-MAILING CIRCULATION@BBJ.HU

RANK

Ranked by net revenue from accounting in 2011

COMPANY WEBSITE

NET REVENUE FROM TAX CONSULTING (HUF MLN) 2011

TOTAL NET REVENUE (HUF MLN) 2011

4,6

2,831

MAIN CLIENTS IN 2011

YEAR ESTABLISHED

NO. OF FULL-TIME EMPLOYEES ON JAN 1, 2012

NO. OF TAX CONSULTANTS ON JAN 1, 2012

OWNERSHIP (%) HUNGARIAN NON-HUNGARIAN

TOP LOCAL EXECUTIVE CFO MARKETING DIRECTOR

ADDRESS PHONE FAX EMAIL

12,6[1]

1989

586

167

– PwC Firm Services (99.25), PwC Eastern Europe B.V. (0.5), PricewaterhouseCoopers Sp. z.o.o. (0.25)

George Johnstone Tamás Pál Viktor Bálint

1077 Budapest, Wesselényi utca 16. (1) 461-9100 (1) 461-9101 info@hu.pwc.com

1989

600

140

Ferenc Eperjesi (2.50), István Henye (2.50) KPMG Hungary Holdings Ltd (95)

Robert Stöllinger William Curley Scheibelhoffer Miklós

1139 Budapest, Váci út 99. (1) 887-7100 (1) 887-7101 info@kpmg.hu

– Deloitte Pannonadria Holdings Limited (100)

Gábor Gion Gerard Lucey Kinga Tihanyi

1068 Budapest, Dózsa György út 84/C (1) 428-6800 (1) 428-6801 deloitteinhungary@deloittece.com

Zsolt Kalocsai Klára Vaitz Edina Váradi

1138 Budapest, Faludi utca 3. (1) 886-3700 (1) 886-3729 info@rsmdtm.hu

PwC MAGYARORSZÁG www.pwc.hu 1

KPMG HUNGÁRIA KFT kpmg.hu 2

DELOITTE MAGYARORSZÁG[2] www.deloitte.hu/ado

RSM DTM HUNGARY ZRT www.rsmdtm.hu

2,667

10,055

1990

370

473

1,238

2001

Individuals (100) –

444

453

2006

– Leitner+Leitner International GmbH (100)

Márta Siklós Veronika Kálmán Wojuteczkyné –

1027 Budapest, Kapás utca 6–12. (1) 279-2930 (1) 209-4874 office@leitnerleitner.hu

Roland Felkai – –

1062 Budapest, Andrássy út 121. (1) 814-9800 (1) 814-9899 budapest@roedl.hu

LEITNER + LEITNER TAX KFT www.leitnerleitner.com 5

RÖDL & PARTNER HUNGARY www.roedl.hu 6

378

918

1991

– Rödl International GmbH (100)

110

Individuals (3) Mazars S.A (97)

Philippe Bruno Michalak – –

1074 Budapest, Rákóczi út 70–72. (1) 429-3010 (1) 235-0481 mazars@mazars.hu

Individuals (100) –

Zoltán Gerendy, Sarolta Király, Dóra Középesy – –

1103 Budapest, Kőér utca 2/A (1) 235-3010 (1) 266-6438 office@bdo.hu

Individuals (100) –

Zoltán Lambert, György Kőrösi, Eszter Balogh, Péter Nagy Réka Kertész –

1143 Budapest, Stefánia út 101–103. (1) 887-3700 (1) 887-3799 klient@klient.hu

MAZARS KFT www.mazars.hu

368

1,434

1991

BDO MAGYARORSZÁG www.bdo.hu

295

1,640

2006

HLB KLIENT HOLDING KFT www.klient.hu

208

950

1998

WWW.BBJ.HU

RANK

16 SPECIAL REPORT ON TAX EFFECTS COMPANY WEBSITE

NET REVENUE FROM TAX CONSULTING (HUF MLN) 2011

TOTAL NET REVENUE (HUF MLN) 2011

125

Budapest Business Journal | Feb 24 – mar 9

MAIN CLIENTS IN 2011

YEAR ESTABLISHED

NO. OF FULL-TIME EMPLOYEES ON JAN 1, 2012

NO. OF TAX CONSULTANTS ON JAN 1, 2012

OWNERSHIP (%) HUNGARIAN NON-HUNGARIAN

TOP LOCAL EXECUTIVE CFO MARKETING DIRECTOR

ADDRESS PHONE FAX EMAIL

372

1993

József Láng (49) ABT Finanzgesellschaft (51)

József Láng József Láng Éva Frauhammer

1037 Budapest, Montevideo utca 3/a (1) 430-3400 (1) 430-3402 abt@abt.hu

1989

Individuals (100) –

István Rajkai Józsefné Kulifai –

1142 Budapest, Erzsébet királyné útja 125. (1) 460-7412 (1) 460-7490 mlx@memolux.hu

ABT TREUHAND CSOPORT www.abt.hu 10

MEMOLUX KFT www.memolux.hu

461

AmCham, BCCH, Amgen, GLS, J.P. Morgan Energy, National Sport Federation

CASH BACK HUNGARY KFT www.cashback.hu

–

Individuals (100) –

Tamás Reich – –

1027 Budapest, Csalogány utca 23. (1) 457-6992 (1) 457-6920 cashback@cashback.hu

BALANCE KFT www.balancekft.hu

118

Dél-Budai Egészségügyi Szolgáltató Kft, Educatio Társadalmi Szolgáltató Kft, Fővárosi Biztonsági Iroda Kft, Jäger Kft, Majestic Food Kft, Területi Művelődési Intézmények Egyesülete

1990

József Dencsi (80), Attila Dencsi (10), Tibor Dencsi (10) –

József Dencsi – Tibor Dencsi

1119 Budapest, Fehérvári út 44. (1) 209-6448 (1) 209-6448/103 balance@balancekft.axelero.net

Andrea Butkovics – –

1138 Budapest, Váci út 141. (1) 452-6900 (1) 452-6910 office@colling.hu

István Havas Csaba Geleta Ágnes Pellion

1132 Budapest, Váci út 20. (1) 451-8100 (1) 451-8199 mailbox.ey@hu.ey.com

COLLING ACCOUNTING & CONSULTING LTD www.colling.hu 14

10.14

143

–

Individuals (100) –

10,468[1]

1989

477

133

» »

ERNST & YOUNG ADVISORY LTD www.ey.com/hu NR

NOTES: [1] Data of business year Jul. 1, 2010 – Jun. 30, 2011 [2] Among the Hungarian subsidiaries, only Deloitte Zrt offers tax consultancy services.

Accounting firms MAIN CLIENTS IN 2011 OTHER

NO. OF HUNGARIAN-REGISTERED PARTNERS

DUE DILLIGENCE

M&A

AUDITING

MANAGEMENT CONSULTING

TAX CONSULTING

FINANCIAL CONSULTING

PAYROLL ACCOUNTING

SERVICES

ACCOUNTING

TOTAL NET REVENUE (HUF MLN) 2011

COMPANY WEBSITE

NET REVENUE FROM ACCOUNTING (HUF MLN) IN 2011

RANK

Ranked by net revenue from accounting in 2011

NO. OF FULL-TIME EMPLOYEES ON JAN 1, 2012 YEAR ESTABLISHED

OWNERSHIP (%) HUNGARIAN NON-HUNGARIAN

TOP LOCAL EXECUTIVE CFO MARKETING DIRECTOR

ADDRESS PHONE FAX EMAIL

–

200 1999

János Babos (50), Process Solutions International Kft. (50) –

János Babos, Andrew Majlath, András Szalai – –

1134 Budapest, Váci út 33. (1) 451-7100 (1) 451-7196 info-hu@ps-bpo.com

– TMF Group (100)

Júlia Varga, Zsuzsanna Táborszki Cselovszkiné – –

1077 Budapest, Wesselényi utca 16., 3. em. (1) 461-3100 (1) 461-3150 hungary@tmf-group.com

PROCESS SOLUTIONS KFT www.ps-bpo.com 1,650

2,057

–

Wizz Air, British Telecom, General Motors, Valad Group, Sumitomo, Ibiden

Domiciliation management and legal administration services

–

65 1995

Northgate Arinso, RIM, Unisys, ICON, Sanyo

100 1995

– UCMS Group EMEA Ltd (100)

Jan Palmkvist Katalin Búzás Zoltán Balázs Nagy

1146 Budapest, Hermina út 17. (20) 775-5888 (20) 775-5888 info.hu@ucmsgroup.com

–

72 2001

Individuals (100) –

Zsolt Kalocsai Klára Vaitz Edina Váradi

1138 Budapest, Faludi utca 3. (1) 886-3700 (1) 886-3729 info@rsmdtm.hu

75 1998

Individuals (100) –

Zoltán Lambert, György Kőrösi, Eszter Balogh, Péter Nagy Réka Kertész –

1143 Budapest, Stefánia út 101–103. (1) 887-3700 (1) 887-3799 klient@klient.hu

TMF HUNGARY LTD www.tmf-group.com 2

1,185

1,521

898

1,247

» » » » » » » »

–

UCMS GROUP HUNGARY KFT www.ucmsgroup.hu 3

RSM DTM HUNGARY ZRT www.rsmdtm.hu

HLB KLIENT HOLDING KFT www.klient.hu

605

592

1,238

950

–

WWW.BBJ.HU

MAZARS KFT www.mazars.hu

364

1,434

–

MEMOLUX KFT www.memolux.hu

362

461

–

ECONOSERVE ACCOUNT’ROLL KFT www.econoserve.eu

260

590

M&A

1,640

AUDITING

530

TAX CONSULTING

BDO MAGYARORSZÁG www.bdo.hu

ACCOUNTING

COMPANY WEBSITE

DUE DILLIGENCE

MANAGEMENT CONSULTING

FINANCIAL CONSULTING

PAYROLL ACCOUNTING

TOTAL NET REVENUE (HUF MLN) 2011

RANK

NET REVENUE FROM ACCOUNTING (HUF MLN) IN 2011

SERVICES

» » » » » »

–

MAIN CLIENTS IN 2011 OTHER

NO. OF HUNGARIAN-REGISTERED PARTNERS

SPECIAL REPORT ON TAX EFFECTS 17

Budapest Business Journal | Feb 24 – mar 9

NO. OF FULL-TIME EMPLOYEES ON JAN 1, 2012 YEAR ESTABLISHED

OWNERSHIP (%) HUNGARIAN NON-HUNGARIAN

TOP LOCAL EXECUTIVE CFO MARKETING DIRECTOR

ADDRESS PHONE FAX EMAIL

» 1989

Individuals (100) –

Péter Hajnal, Sarolta Király, Dóra Középesy – –

1103 Budapest, Kőér utca 2/A (1) 235-3010 (1) 266-6438 office@bdo.hu

–

110 1991

Individuals (3) Mazars S.A (97)

Philippe Bruno Michalak – –

1074 Budapest, Rákóczi út 70–72. (1) 429-3010 (1) 235-0481 mazars@mazars.hu

AmCham, BCCH, Amgen, GLS, J.P. Morgan Energy, National Sport Federation

45 1989

Individuals (100) –

István Rajkai Józsefné Kulifai –

1142 Budapest, Erzsébet királyné útja 125. (1) 460-7412 (1) 460-7490 mlx@memolux.hu 1117 Budapest, Szerémi utca 7/A, 1/103 (1) 464-4340 (1) 464-4349 szentirmai.balazs@ econoserve.hu

–

Praktiker Kft, Kika, Shell, Interdean, Karcher

52 1991

Józsefné Cserni (100) –

Balázs Szentirmai – –

27 1993

József Láng (49) ABT Finanzgesellschaft (51)

József Láng József Láng Éva Frauhammer

1037 Budapest, Montevideo utca 3/A (1) 430-3400 (1) 430-3402 abt@abt.hu

23 1994

– Leitner + Leitner Österreich Wirtschaftsprüfungs GmbH (55), Leitner + Leitner International GmbH (45)

Márta Siklós Veronika Kálmán Wojuteczkyné –

1027 Budapest, Kapás utca 6–12. (1) 279-2930 (1) 209-4874 office@leitnerleitner.hu

Individuals (30) Accace Limited (70)

István Nemecz Zsuzsanna Gyenge Anikó Burai - Kovács

1132 Budapest, Váci út 22–24. (1) 412-3530 (1) 288-0056 istvan.nemecz@accace.com

ABT TREUHAND CSOPORT www.abt.hu 174

372

–

LEITNER+LEITNER AUDIT KFT www.leitnerleitner.com 148

ACCACE INTERBOOK KFT www.accace.com

396

–

27 1996

–

17 –

Individuals (100) –

Andrea Butkovics – –

1138 Budapest, Váci út 141. (1) 452-6900 (1) 452-6910 office@colling.hu

14 1995

– Alessandro Farina (100)

Alessandro Farina Sheila Moriconi Alessia Pennese

1056 Budapest, Váci utca 81. (1) 269-5679 (1) 269-5625 info@itlgroup.hu

10 2003

Eszter Szigecsán (45), Tamás Danku (45) GRND Ltd (10)

Tamás Danku – –

1122 Budapest, Tóth Lőrinc utca 11. (20) 583-8380 (1) 700-4545 info@grandconsulting.hu

160

–

Capgemini, EQUANT, Arrow ECS, Scania Hungária, MDO, ING/CBRE, BAXTER

143

–

COLLING ACCOUNTING & CONSULTING LTD www.colling.hu 13

ITL GROUP KFT www.itlgroup.hu 76

GRAND CONSULTING KFT www.grandconsulting.hu

»= would not disclose, NR = not ranked, NA = not applicable

157

–

This list was compiled from responses to questionnaires received by Febr 20, 2012 and publicly available data. To the best of the Budapest Business Journal’s knowledge, the information is accurate as of press time. While every effort is made to ensure accuracy and thoroughness, omissions and typographical errors may occur. Additions or corrections to the list should be sent on letterhead to the research department, Budapest Business Journal, 1075 Budapest, Madách Imre út 13–14., or faxed to (1) 398-0345. The research department can be contacted at research@bbj.hu

[ EXPERT OPINION ]

No one likes surprises in ﬁnancial administration matters JÚLIA VARGA Managing director

As the managing director of the Budapest office of TMF Group, which operates successfully in 75 countries and provides accounting and management services, I observe that the life of companies in the current Hungarian environment is burdened by the changes of legislation.

The first part of the year is particularly busy for experts involved in the accounting function of firms. While the profession is accustomed to annually changing laws, by the end of 2011 even non-professionals might have realized just how much change was being made in the legislation. Our task is not only to inform clients about the changes that affect them, but to ensure that they remain compliant all the time within the statutory framework. To achieve this we devote much more time to handling transactions occurring in our clients’ life that are regulated by law ambiguously. Even the “simple” increase of the VAT rate and the invoicing alterations emerging from the transformation resulted in difficulties. Compared to this, following the new “expected salary” rules is indeed costly.

The main aim of the "Simple State Program” is to curtail the administrative burdens that are the prime barriers in business development. We welcome the intention, yet we can hardly see how this ambition will become manifest. Experts suggested annual reporting in the case of “small taxes”. Instead, increasing administration of the vocational contribution was introduced, which can hardly be understood by clients. Being creative, some companies try to narrow their bank charges of the monthly advance payment in a way that they transfer a higher amount of money to the Tax Authority. This approach, however, does not substitute for monthly reporting. As we have not faced every consequence arising from the regulatory changes, 2012 reserves new challenges. Based on the present definition, more companies should pay innovation contribu-

tion in the future. In order to set the innovation contributions, further data should be requested from mother companies. One goal of the Simple State Program is that planned changes in legislation are measured upfront with the consequent administration burden. Reducing the latter, strengthening a friendly approach to compliant taxpayers and a non-friendly one to non-compliant persons will certainly bring back confidence to business and the country. TMF Hungary Ltd. Wesselényi u. 16., 3. em. 1077 Budapest T. +36 1 461 31 00 julia.varga@tmf-group.com www.tmf-group.com

NOTE: ALL ARTICLES MARKED EXPERT OPINIONS ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILITY

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18 TRENDS

Budapest Business Journal | Feb 24 – mar 9

Shrinking register

Cafeteria

Taxes

Tax authorities faster and more rigorous

HR managers decide not to decide

Bulgaria emerges as one of the EU’s most attractive tax environments

New vouchers don’t replace the old Choice on voucher (% of employees)

Source: Edendred 2012

Source: Cafeteria Trend 2011

IS THE FLAT TAX RATE FOR BOTH PEOPLE AND BUSINESSES

The power of a simple tax regime and low rates can never be underestimated: the recent success of Bulgaria is a perfect example of this. Besides a growing number of newly established local businesses, ever more international companies are establishing their headquarters in Bulgaria these days, for tax optimization purposes. Since 2007, the country has applied a flat rate of 10% on the taxation of both individuals and companies. This is the lowest rate in the EU, with other member states having corporate tax rates of between 15%-36%. Many incentives also help to make tax optimization decisions easier. If the business is situated in a region of high unemployment, corporate income tax can even be zero-rated. Additionally, an important consideration for employers is that the maximum monthly taxable base for personal income tax is 2,000 Bulgarian lev (about €3,900). The Bulgarian tax regime also contains multiple incentives for those investing in a new venture. Withholding tax on dividends is at 0% when the dividend is being distributed between EU member residents, a report from local Sb Accounting & Consulting notes. The VAT rate is 20%, but can drop as low as 0% for exports and certain other activities within the EU. The refund of pre-paid VAT can be set to every three months or every month if certain requirements are met. Large investment projects that have received authorization from the Ministry of Finance can receive a refund within 30 days. It seems, though, that large international companies consider many other factors Following Bulgaria’s accession before moving to to the EU in 2007 and a regional Bulgaria, and that even a trade and market cooperation stable tax environment with Greece, by the end of 2008 can’t counteract the the country had become one general debt crisis in of the most attractive for FDI in the Central and Eastern Europe Europe. For this reason, region. However, the global says the Bulgarian National financial crisis left its mark on Bank, direct foreign the Bulgarian economy, and FDI investments in Bulgaria only started to recover in the shrunk by over 40% in 2011 first half of 2011. to gross €542 million. AJM

€

9.05 bln

FDI falling (€ billion)

FDI rising (€ billion)

Source: Bulgarian National Bank

Withdrawn tax numbers by region

Source: feketelista.hu

Among the many changes in the tax environment that took effect on January 1, 2012, rules governing so-called cafeteria services are making HR experts most unsure, according to a fresh survey conducted by voucher-based service provider Edenred. The new options include two vouchers issued by the state-owned Hungarian National Holiday Foundation (MNÜA): the Erzsébet Card for hot meals and the Széchenyi leisure card. Respondents to the survey are most worried about the usability of the new vouchers: 90% agree that an extensive and reliable network of affiliates is of critical importance. The possibility of having a free choice of values and usage is equally important for 81% of managers. Currently, HR professionals fear that employees won’t like the new vouchers offered by the state monopoly provider because of the lack of affiliates. Usability is also vital concerning benefits given in electronic forms, which were introduced in 2012. The main concern is similar: the low penetration of POS terminals. However, 58% of respondents added that this product would be mature in one and a half years. According to half of the managers, employees will have a hard time using the “threepocket system”, putting extra charges on HR professionals trying to support the usage of this benefit in their organizations. Concerns also emerge about the value of the cafeteria packages offered to employees: only 18% of respondents would increase it, while 51% still hadn’t decided in the first weeks of January. Among the 9.2% who are partly or fully content with the new forms of benefit, 42% didn’t know whether to increase or decrease the value of the cafeteria plans. The end of 2010 drove When asked about the HR professionals into a types of vouchers that similar corner with the 2011 would be considered for introduction of the Széchenyi employees in 2012, 56% Leisure Card and the parallel of managers and HR existence of the Üdülési professionals indicated Csekk (Holiday Vouchers). In a survey taken by Cafeteria they would give the new Trend magazine, almost 15% vouchers a try, but 52% said of respondents decided to put they would also keep the both in their selection, while traditional meal vouchers 13% hadn’t made their minds up among the benefits. AJM yet about these benefits.

15%

10%

OF MANAGERS WORRIED ABOUT THE USABILITY OF THE STATE VOUCHERS

Source: Eurostat

The National Tax and Customs Authority (NAV) suspended a record number of tax numbers in 2011, almost 15% of the more than half a million operating entities, feketelista.hu reported. In Budapest and Pest County alone, the number of companies with a withdrawn account increased fourfold last year, according to the site’s statistics. The main reason behind the significant increase is that the tax numbers of companies that do not publish their accounting reports in the Company Bulletin now also get withdrawn. In Hungary, 420,000 companies are obliged to publish their reports electronically. According to the legal procedures, another reason for withdrawing a number is when a document sent by the tax authorities is undelivered because of an unknown recipient. The procedure is the same if a company doesn’t report its representative to the authorities or the person cannot be found at the given address. Tax numbers are also withdrawn in the case of a continuous 60-day closure of a company’s business. A withdrawn number represents serious financial drawbacks, because the company cannot make tax claims, reimbursements and budget subsidy applications. Such a difficult financial situation might also cause problems for its business partners. According to NAV, most of these cases result in forced final settlement, but if the necessary funding is lacking, liquidation will be initiated, with a very low chance for remuneration. Some 30 days after withdrawal, NAV deletes the tax number, and if In line with increased rigor, the company wants to more than 32,000 companies continue operations, it were penalized last year, while will have to re-register. between 2007 and 2009, the Assuming the authorities suspended a yearly conditions for legal average of about 10,000. operations are met, the According to feketelista.hu, a total of 138,571 numbers have authorities will issue been suspended since recording the new number, but began in December 2006. stricter check-ups can be expected. AJM

32,000

79%

Source: Eurostat

77,634

COMPANY TAX REGISTRATION NUMBERS SUSPENDED IN 2011

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BUSINESS 19

Budapest Business Journal | Feb 24 – mar 9

Hungarians on the bookshelf A tiny little country in the middle of Europe with a language spoken by no more than 15 million people worldwide might have no realistic dreams of ruling the global literary market. Still, the translations of some Hungarian authors have managed to secure fixed spots on international bookshelves. What is the secret of their success? Surges in the international popularity of Hungarian books, such as that which followed Imre Kertész winning the Nobel Prize for Literature in 2002, do not happen often enough to help put Hungary’s literature in the spotlight. Meanwhile, the budget supporting translations of Hungarian books into foreign languages has recently become a victim of general state cost cutting. All of which makes the work of Hungarian cultural institutes abroad, not to mention the activities of translators, increasingly important. “International book publishing cannot be conducted centrally from the top,” Dóra Károlyi, a fellow at the Petőfi Museum of Literature – an institution that, alongside many other tasks, calls tenders for the translation of Hungarian works – told the Budapest Business Journal. Publishing companies consider many aspects when deciding which books to translate and publish, she said, adding that the enthusiasm of translators, often well connected with the publishers, significantly contributes to the success of Hungarian books beyond the borders. DEEP-ROOTED ADVANTAGE The first step, obviously, is to have a book that, although written by a Hungarian, manages to talk to foreigners too. “An internationally successful book has to have a voice that foreign readers are able to take in,” Károlyi said. As such, the similarities and the traditionally strong cultural connections between Hun-

AN INTERNATIONALLY SUCCESSFUL BOOK HAS TO HAVE A VOICE THAT FOREIGN READERS ARE ABLE TO TAKE IN. gary and Germany has made German the most popular target language for Hungarian literature. “Germany might always have its advantage, but we are falling in line as well,” Natália Nagy, a contributor to the Hungarian Cultural Center in London, told the BBJ, referring to the increasing popularity of Hungarian books in the UK. While the monthly literature nights

organized by the cultural center contribute to that success, Nagy says the old rule that good products sell themselves is still valid. “Hungarians living in the UK do most for the local popularity of Hungarian books by telling their friends about their literary experiences,” she said. Readers’ preferences are also weighed by the recommendations of dominant papers. A series of reviews of Antal

Szerb’s books published in The Guardian brought extra attention to an author who is anyway traditionally well accepted in the UK, together with other 20th-century writers such as Sándor Márai and Magda Szabó. The latter’s popularity possibly hints at a coming surge on the back of a new movie by director István Szabó adapted from her book “The Door”, and now set to tour European film festivals.

GOOD TOGETHER Such a tie-in sale has often proved to be useful overseas. While the American market is strongly focused on books originally written in English, meaning that the proportion of translations of foreign books is not more than 3%, the work of contemporary writer László Krasznahorkai have become quite popular recently. His works have always enjoyed huge critical success but the reason they have also remained in popular demand for the past ten years originates mostly in the writer’s long-term cooperation with film director Béla Tarr, who has earned cult status among top New York intellectuals. Most recently, Krasznahorkai was featured in influential papers such as The New Yorker due to the appreciation of Tarr’s movie “The Turin Horse” (A torinói ló). The film, whose script was written by Krasznahorkai, won the Silver Bear, the

Jury Grand Prize at the Berlinare Film Festival in 2011. “It is still hard to predict which books might become hot in such a complex and rich market,” Gergely Romsics, a fellow at the Balassi Institute, the Hungarian Cultural Center in New York, told the BBJ. While intellectuals can be touched by, for example, the festival success of Krasznahorkai’s script or by a New York Times article on Péter Nádas’ 2011 book “The Parallel Stories”, the wider masses are reached only through star bloggers or, more effectively, through television, he said. The example of German writer Bernhard Schlink’s “The Reader” (Der Vorleser) illustrates the power of the small screen well. Schlink’s work was critical acclaimed in the US when first published, but it became a bestseller only one year later, after television celebrity Oprah Winfrey included it in her influential and trendsetting Book Club. ÁV

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Budapest Business Journal | Feb 24 – mar 9

E X PA T A D V IC E F O R N E WC O M E R S

WHO'S NEWS Do you know someone on the move? Send information to research@bbj.hu

Kwakkelstein has been the country manager of Celgene Hungary, Estonia, Latvia and Lithuania since 2010. He came to Hungary from Switzerland, where he worked as a medical director of Celgene between 2007 and 2009. Prior to that, he was the director of medical affairs oncology in Central and Eastern Europe for Novartis AG in Switzerland. He has also worked as an industrial medicine and medical advisor for insurance companies, a clinical research associate at Solvay Duphar, a global medical project leader at Boehringer Ingelheim B.V. and an associate medical director for Chiron. Since 2010, he has had a great affinity towards Eastern Europe and has negotiated with many governments on access to life-saving drugs.

MARTHIN KWAKKELSTEIN

Turóczi, the head of the digital media division at Kirowski Isobar since 2007, has become the director of the digital media division of Aegis Media. Turóczi will be leading the group’s digital activities as well as further strengthening the company’s market position. Name András Turóczi Current company/position Aegis Media, director of the digital media division Previous company/position Kirowski Isobar, head of the digital media division

Name Pál Simák Current company/position MKB Bank, CEO Previous company/position MKB Bank, deputy CEO

Name Noémi Alexa Current company/position Transparency International, managing director Previous company/position Transparency International, managing director

Simák, deputy CEO of MKB Bank, will succeed Tamás Erdei as chief executive officer. Simák has been deputy CEO and a board member of MKB since 2008. Between 2000 and 2007 he was a member of the Budapest office of McKinsey & Company and directed financial projects. He will also be responsible for accountancy, controlling, strategy, business and human policy.

Name Ádám Halmos Current company/position Libri, Helikon, director Previous company/position Libri, director

Alexa is once again the head of Transparency International in Hungary, returning to the position after her maternity leave, and taking over from Ádám Földes, who will continue as TI’s legal director. Alexa was appointed director in 2006. Prior to that, she worked as a deputy director of the department of international relations at the Ministry of Youth, Family, Social Affairs and Equal Opportunities. She holds a degree in Spanish and cultural anthropology and a Ph.D. in international relations.

Halmos, the head of publishing house Libri, has become the director of Helikon Publishing as well, as a result of the takeover of Libri. The company is integrating its non-publishing-related activities such as trade, finance, logistics and marketing. Libri will also a launch a new children’s book publisher, Kolibri, which will be led by Miklós Papp, from Líra Publishing.

Country manager, CELGENE HUNGARY WHEN DID YOU ARRIVE IN HUNGARY AND WHAT BROUGHT YOU HERE? I arrived in January 2011. I started as the first County Manager for Celgene in Hungary. Both the company and I want to establish our offices in Hungary and make sure our products will improve the lives of Hungarian clients just as they do in almost all other European countries. I first came to work in Hungary in 2002, but for another company. Many things have changed and improved since then. WHAT HAD YOU HEARD OF HUNGARY BEFORE YOUR ARRIVAL? I knew it is a country with a rich history and Budapest is one of the most beautiful capitals in the world. It is also a country that in a short time, especially in the last few decades, has gone through many important changes.

Name Péter Ádám Current company/position EST MEDIA, sales director Previous company/position HVG Kiadó Zrt, team leader of agency and business development

WHAT DO YOU THINK OF HUNGARY NOW? After more than a year working permanently in Hungary I only appreciate the country and the people more than before. Even in the current difficult times there are so many opportunities for Hungary and Hungarians. The people are friendly, hardworking and open to finding solutions WHY IS HUNGARY IMPORTANT TO YOUR COMPANY? Our company develops medication to improve the lives of patients worldwide. We focus on what is called rare diseases. A small number of patients suffer from these often life-threatening diseases but due to the support from the EU, among others, to stimulate research and improve access to these drugs, they now have new hope. IF YOU HAD A CHANCE, WHAT WOULD YOU IMPORT TO HUNGARY (IDEA, PRODUCT, MENTALITY, ETC.)? I would import our drugs, which have proven to extend and improve the lives of people with serious blood cancers: Revlimid for people with Multiple Myeloma and Vidaza for people with MDS. In most EU countries patients already have access to these drugs and Hungarian patients should have the same opportunities as patients in other EU countries. WHAT WOULD YOU TAKE WITH YOU FROM HUNGARY TO YOUR HOMELAND (IDEA, PRODUCT, MENTALITY, ETC.)? Hungarian music and Tokaj wine, two ingredients for a very pleasant evening. BESIDES BUSINESS, DO YOU HAVE OTHER TIES TO HUNGARY? As a student I had already enjoyed holidays around Lake Balaton and recently I found the area around Lillafüred very nice to spend some free time. I can recommend both places to anyone who visits Hungary. WHAT WOULD BE THE ADVICE YOU’D GIVE TO AN EXPAT WHO IS JUST ABOUT TO ARRIVE IN THE COUNTRY? Enjoy the time in Hungary, learn the language even though it is difficult and use the unique opportunity to work with Hungarians. Exchange your knowledge and learn from them, their culture and spirit. This way, you will contribute to this country and you will take home precious memories. ZSV

Name Imre László Current company/position Siemens Hungary, head of Health Division Previous company/position Siemens Hungary, head of Imaging and IT division

Ádám has been appointed sales director of EST MEDIA. Ádám will be responsible for the advertising and sponsorship activities of the group. He previously worked as a team leader of agency and business development at HVG Kiadó Zrt. Prior to that, he was director of direct sales at Sláger Rádió. He has been hired to strengthen the company’s sales performance.

László has become the head of the health division at Siemens Hungary, after the resignation of former director Csaba Szokodi, as an interim director. László received his degree in electric engineering at the Technical University of Budapest in 1992. His career began at Siemens as a service engineer. Since 2001, he has participated in the company’s sales activities as a CT and MR specialist. He became head of sales in 2005. László has been leading the company’s Imaging and IT division since 2010.

Name Csaba Siklósi Current company/position Hungexpo, director of trade Previous company/position Hungexpo, sales director

Name Jan Habes Current company/position Beiersdorf Hungary, managing director Previous company/position Beiersdorf Czech Republic, country manager

Siklósi has been appointed the director of trade at Hungexpo, succeeding Benoit Barbault, who has stepped down after four years. Siklósi has been with Hungexpo since 2011 as the sales director of the company. Before joining the company, he worked as program director of Főnix Event Organizing NPO at Debrecen. Siklósi will be responsible for event and venuerelated sales and strategy.

Habes has been appointed managing director at Beiersdorf Hungary Kft. He succeeds previous director, Thomas Lichtblaut, who will continue to work as a managing director at the company’s Swiss center. Prior to this position, Habes was country manager of Beiersdorf in the Czech Republic.

22 SOCIALITE

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Budapest Business Journal | Feb 24 – mar 9

Counting wages In order that net wages do not fall as the result of tax changes, the government has decreed that workers who earn less than gross HUF 218,000 a month must be compensated in both the public and private sectors. Under a compensation scheme in effect since the start of the year, corporate sector employers cover up to a 5% wage increase as compensation, while the government is to pay for any raise over that if the employer in question raises the wages of all affected employees by the required extent. Employers meeting the conditions can deduct the portion over the stipulated 5% of the necessary wage rise from payroll tax obligations. Also, according to a recent modification, the government will grant employers support for wage increases of 2-3% in order to help them reach the 5% threshold. ÁV

HOW DO YOU THINK THE CORPORATE SECTOR WILL REACT TO WAGE COMPENSATION? GABRIEL A. BRENNAUER CEO AND MEMBER OF THE BOARD German-Hungarian Chamber of Industry and Commerce

Although it will put additional burdens on companies and thus on their competitiveness and their ability to create new or even maintain existing jobs, according to our information, many companies will carry out the “expected” pay rises. The major reason behind this is that otherwise they would be excluded from public procurement tenders, state subsidies or state funds, e.g. for vocational training. Given the positive tax incentives available for companies that carry out the compensation, the German-Hungarian Chamber has urged the administration to abrogate these negative sanctions.

PAUL STOLK CHAIRMAN Netherlands-Hungarian Chamber of Commerce

I think the corporate sector will not react too much to the wage changes themselves, but the fact that Hungary is getting less competitive and less predictable will cause foreign investments and job creation to stagnate.

ISTVÁN STVÁN HAVAS PRESIDENT American Chamber of Commerce in Hungary

An increase in labor costs without an increase in productivity has been taking place gradually in the past few years and it is now significantly reducing the competitiveness of the Hungarian economy. The increase of the minimum wage impacts SMEs particularly badly, as well as companies employing relatively low-paid, less well-educated workforce such as contract export manufacturers. Nevertheless, I think the larger corporations at least will mostly comply with the government expectations of voluntary wage increases, despite their clear concerns that the wage compensation system may be terminated in future years while they will be left with increased labor costs. It is quite unfortunate though that the formula used in the regulation for calculating the wage compensation does not take into account a number of wage components that are applied in a typical manufacturing environment.

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Netherlands-Hungarian Chamber of Commerce: Business Lunch with the Italian Chamber of Commerce in Hungary LOCATION Hotel Intercontinental, 1052 Budapest, Apáczai Csere J. u. 12-14 TIME 12:30 p.m. – 2 p.m. FEE members: HUF 5,000 + VAT; non-members: HUF 7,500 + VAT ORGANIZER Netherlands-Hungarian Chamber of Commerce CONTACT www.dutcham.hu; info@netherlandschamber.hu

Valentine Day Dinner – Friends of Canada LOCATION Café Jubilee Budapest, 1055 Budapest, Szent István körút 13 TIME 6:30 p.m. ORGANIZER AmCham, T.G.I. Friday’s CONTACT Canadian Chamber of Commerce in Hungary CONTACT www.ccch.hu

Global Leaders on the AmCham Podium: Paula Dowdy, Vice President, Cisco Services, EMEA and Russia LOCATION Budapest Marriott Hotel, 1052 Budapest, Apáczai Csere János u. 4 TIME 12:30 p.m. – 2 p.m. FEE AmCham members: HUF 12,000 + VAT; non-members: HUF 27,000 + VAT ORGANIZER American Chamber of Commerce in Hungary CONTACT Anita Árvai, anita.arvai@amcham.hu, +36 1 428-2086

Business Seminar on Reputation Management and its Financial Implications LOCATION art’otel Budapest Garden & River room, Budapest 1011, Bem rakpart 16-19 TIME 9 a.m. FEE Members: free of charge; non-members: HUF 3,000 + VAT ORGANIZER The British Chamber of Commerce in Hungary in association with BDO Magyarország and the Hungarian PR Association CONTACT www.bcch.com

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SOCIALITE 23

Budapest Business Journal | Feb 24 – mar 9

Most Hungarians associate marzipan with the name Szamos. And they have a good reason for that: Szamos Marcipán started out as a little family enterprise more than 40 years ago and has turned into a prosperous firm since. I still remember a gift I received for Easter when I was about eight. My mom gave me a glass jar filled with small pieces of fruit: peaches, plums, oranges, apples, and who knows what else, all shaped in a very lifelike manner and all made out of marzipan. I liked the gift so much that I ate only one piece a day to make it last longer. Of course, the jar emptied eventually, but that was my first encounter with the sweet delight made of almond meal and sugar. And now, 30 years later, I also know that those wonderful little pieces of marzipan fruit came from Szamos Marcipán, a family business that has lived through the last decade of the previous regime as well as the economic challenges of the last 20 years.

The history of Szamos Marcipán goes back to the first half of the 20th century. In 1936, a young man called Mátyás Szamos (originally Szavits Mladen, as he had Serbian roots) from Szentendre headed to the capital to find his luck. He wanted to be a confectioner, and he also wanted to be the best – from the very beginning of his career. He wanted to work with and learn from the giants of the industry. This is how he got admitted to the Auguszt, possibly the most famous confectionery of the time. Later he went to work with another legend, Gerbeaud. Times changed, and the young confectioner found himself at a large stateowned company (typical in 1950s Hungary), the South Buda Catering Company. Soon he was promoted to head the bonbon department, and received several awards at confectionary contests throughout the decade. By that time, Szamos had gained a reputation in the profession by making marzipan ornaments – his specialty was a marzipan rose he had learned from a Danish confectioner, and later on, his colleagues would call him the Marzipan King. In the 1960s, Szamos was flooded by orders from confectioners all over the coun-

Photo: Péter Németh András

A big success from sweet little things

try who were happy to get rid of the tiring and time-consuming task of making marzipan ornaments for their tarts and cakes. The socialist era started to soften in the 1970s, allowing manufacturers to get a license to work on their own. As one manufacturer could only have three employees, the whole family got such licenses, thus managing to employ nine people – and all the employees they could get were needed, as demand continued be high. The first Szamos workshop opened in 1971 in Pilisvörösvár. Today, the company’s headquarters and factory is still in the town, some 20km northwest of Budapest, employing 250.

The first Szamos store where daily confectioneries were sold opened on Buda’s Böszörményi út in 1998. “Within two years after the opening, the Böszörményi confectionery was registered among the top three such stores in Budapest,” Kelényi notes. Their secret rests in using quality ingredients, he says, and in the fact that the Szamos name has gained a reputation not only in the industry but in the wider community as well. Today, the company has seven confectioneries and 15 sweet

Photo: Péter Németh András

Ádám Kelényi and Gabriella Szamos

late school, where anyone can learn the basics of bonbon and truffle making. Gabriella Szamos, daughter of the late founder, created the interior of the 200sqm shop, as she does for every Szamos facility. The classic and elegant interior fits well into the original design of the building. “We had to take certain restrictions into consideration during the design process, as the Stock Exchange Palace is a historical building. But we could add our own style as well,” Szamos says. PF

Chocolate school – make your own Photo: Péter Németh András

PRESTIGIOUS LOCATIONS Opening the first shop in downtown Budapest in 1986 was a milestone in the company’s life. It sold marzipan and chocolates; “This was the first time our customers could meet our products directly,” says Ádám Kelényi, one of the grandsons of Mátyás Szamos and financial director of the family business. The shop became one of the most popular ice-cream parlors and confectioneries of the time and was soon followed by further openings in the plazas that started appearing in Budapest during those years in the early and mid-1990s. By then, the whole family was involved in the business and decided to break free from the supplier role it had played until then in the industry.

shops, and employs – in addition to the 250 headcount in Pilisvörösvár – another 150 in Budapest. The latest development of the company was the grand opening of the Szamos Gourmet Ház on Vörösmarty tér, in the building of the former Stock Exchange Palace. A confectionery, coffee house and chocolate factory all in one – the facility mixes everything Szamos represents. In addition to sweets and daily confectioneries, it has an exclusive menu with several Hungarian specialties on it. It also boasts a choco-

Everything you always wanted to know about chocolate but were afraid to ask can be answered at the Chocolate School in the recently opened Szamos Gourmet Ház on Vörösmarty tér. And there is more to it: you’ll not only learn about the abundant crop of cocoa bean fields in West Africa – where 70% of the world’s supply comes from –

or the cocoa butter content of dark chocolate, you can also indulge in the sweet duty of making your own chocolate. Under the capable hands of confectioner Barna Máthé, the secrets of chocolate tempering or the desired consistency of fillings are revealed four times a week. Courses can be attended in small groups that allow everyone to actively take part in the process – and then at the end of the threehour lesson, you can leave with the sweet rewards that are packed into a beautifully designed Szamos box. If you’re a chocolate fan and feel the desire to make your own, you’d better book now: all classes are already full until the end of March. Szamos Gourmet Ház, 1052 Budapest, Váci u. 1. Phone: 06 30 570-5973; www.csokoladeiskola.hu