The government will apply the reduced 18pc VAT rate to commercial accommodations from July 1 under a Monday agreement between the government and the parliamentary group of Hungary’s governing Hungarian Socialist Party (MSZP), Istvan Ujhelyi, state secretary at the Prime Minister’s Office said on Tuesday. Mr Ujhelyi is also an MP and vice president of MSZP.
Hungary’s general VAT rate will be raised from 20pc to 25pc as of July 1.
Mr Ujhelyi said the lower VAT rate will leave some HUF 10bn in the accommodation sector.
Gross revenue of commercial accommodations totalled HUF 245bn last year of which HUF 139bn came from accommodation services.
So it seems that priorities are not essential items such as gas, electicity, water, food and childrens clothing.
Nope, the hotel industry is far more consequential in the state of the nation.
These guys are just bonkers!
One reasoning could be that lower hotel tariff increases tourism, hence bringing more euro’s into economy. Lower VAT on gas, electicity, water, food etc would make prices cheaper but people would just save those moneys.
This VAT decrease for hotels is certainly not bonkers. The hotels are competing directly with other cities in Europe and have been forced to massively reduce their rates and lay off staff due to the economic crisis. The new VAT rise would have forced the rates down even further and resulted in closures and massive job losses, not to mention the consequential decrease in foreign currency coming in to the economy. From a simple economic stance, decreasing VAT on hotels will increase the number of foreign visitors, particularly in the meetings and conferences market. This will make more money for the economy than the VAT increase would have provided.
The thing that is really bonkers is the whole Hungarian tax system, in the way it effectively forces ordinary citizens to dodge paying income tax because the rates are simply too high for most people to survive on the net income. The 5% increase in VAT is the result of a government who are resigned to the fact that they can only generate immediate cash for the economy from indirect taxation because the direct tax system simply doesn’t work. If only they would decrease income tax to affordable levels and then properly enforce it then the majority of the population would pay and the economy could recover.
I agree with a lot of what you say H, especially about reducing tax.
Yes this VAT exception will help hotels, although the Forint exchange rate also has an impact with respect to our hotels competing with foreign hotels. And I would also suggest that the tourist industry is not the only industry that needs help in these times.
I am not sure, as Mystery Shopper suggests, that reducing the price of essential utilities won’t have any effect on the liquidity of money in the economy. Sure some people will use this to save more, but some may just not put off any longer some essential maintenance or item they wish to buy.
Stimulating the economy from within e.g. subsidies for trading in old cars when buying a new one, seems to be working. I’d like to see more of that and more money in peoples pockets to spend.
Personally, I’m with JD’s first comment. It is just bonkers. But that’s what happens here. There are ridiculously strict or harsh rules, and so plenty of exemptions to each of them.
Part of the reason for the low occupation rates is the whole GFC. Part of it is just people building too many hotels, with more on the way.
Any industry could claim that a 7% reduction in its final cost will help its position. Now every industry will…
The VAT and room taxes on hotel stays by foreigners should be INCREASED by some 100% overnight!! That would teach some of these bargain hunting foreigners who only come here to get stuff on the cheap-cheap-cheap at working Hungarians’ and the tax authorities’ expense.
In the old days, foreigners paid triple of what Hungarians paid for the same room at the same hotel, that fair and equitable practice should be reinstituted next year by the new gov’t!
Damn! Just found some thoughtful, interesting and
worthy comments which had all the makings of a
discussion, and then, low and behold….(sound of
trumpets)…Anonymous!
Your posting is so bone-headed and foolish that
I’m surprised that it’s very sending hasn’t broken
the Hungarian internet. Your grasp/or not of economics is as childish as your ranting are
amusing (for a short while). I should love to see
how long a hotel run by yourself might stay in
business implementing your financial plan. yes, I
see full employment coming to the hospitality
sector.
PS Re your “working Hungarians”, only 15% of
Hungarians actually work. And re the tax
authority, it is Hungarians, burdened with very
high taxation, who try to weasel out of paying.
PPS Recently the comments section of this blog
appears to be transforming into shrill ranting and
uncalled for name calling and flaming. Lots of
opinion…but so little respect. Sad.
Hey Lamb, you may be little, but apaprently already a big jerk. Why are you attacking everyone, fool?
Anyhow… you must be a member of one of them Hungarian-suffocating Western hordes uninvited in our country only to milk us dry, then disappear with the loot to your foreign cave. Nichts wahr?
Meanwhile, be ready for the following: 1/ Hungarians are not so much impressed and enamored by nogoodnik Westerners as they used to be under the hard-core Commie regime. 2/ You will be taken advantage of and be ripped-off everywhere you turn, and with good reason. 3/ If you should have an operation in Hungary, expect the locals rob you blind and still wish you ill behind your back.
In other words: WELCOME TO HUNGARY, mon ami. Have a nice stay (at the hotel).
Anonymous, I don’t understand. Please explain how
1. Ripping off tourists is good for the tourist industry.
2. Ripping off non-Hungarians living in Hungary is good for economic development.
3. The Hungarian economy can exist in isolation.
This story is about VAT and, in my opinion, the issue of giving hoteliers a break before the general public.