November 9th, 2010

Controversial 98% tax on gov’t severance pay made retroactive to 2005

The government will make the 98% tax on severance pay above a certain sum retroactive to 2005, under a proposal put forward yesterday by caucus leader János Lázár.

The Constitutional Court struck down the 98% tax last month, in part because it had retroactive effect to the beginning of 2010.

Lázár said the minimum level of payment to which the tax would apply will be raised from Ft 2 million to Ft 3.5 million. However, the special tax would be imposed on Ft 2 million payments for state and local government leaders and chief executives of state and local government-run companies.

State leaders would have to pay the 98% tax over Ft 3.5 million on income collected after January 1, 2005, and would be required to pay the tax by March 31, 2011. The Constitution will be amended accordingly.
The extension of the tax would mean that former members of the Gyurcsány and Bajnai cabinets would be ordered to replay large sums to the state, Magyar Hírlap writes.

Gyurcsány left in 2009 with over Ft 9 million in severance pay, former finance minister János Veres and former secret services minister György Szilvásy each received Ft 7.7 million, while former BKV spokesman Miklós Regőczi collected Ft 34 million, former BKV CEO Botond Aba Ft 13 million, and former Duna TV head László Cselényi Ft 49 million.

Politics Can Be Different (LMP) said the whole idea of such special taxes should be abandoned, in keeping with the Constitutional Court’s decision.

Caucus leader András Schiffer said ordinary people now fear that if they collect their severance pay the state will later demand it back. Schiffer also called for revoking the bill curbing the authority of the Constitutional Court.

  • Zaerimner

    Well, now we’re talking. Nice

  • Palánta

    Do these Fidesz weenies have any idea how much they
    are undermining international confidence in
    Hungary’s regulatory environment with all this
    arbitrary changing of rules on things that should be
    considered done deals? OK, if you want to charge
    someone with criminal negligence for awarding
    themselves money the company or the state couldn’t
    afford to pay them, that’s different. But for
    Christ’s sake, then you do it in court and give
    people a chance to defend themselves. But just
    changing to rules and saying they apply to things
    that happened in the past? That’s… er…
    dictatorial. You don’t pass laws just because you
    have a big majority and it’s an easy way to solve
    your short-term problems.

  • Canaadian

    What a comedy farce.

    Wow, Fidez is really pushing the limits with this new law, retro dating it back to 2005?

    It will undermine international sentiment in the sense that companies now not only have to worry about today’s regulatory enviroment, but also that of future govt. Sure, this sounds great when you quote the former govt officals. But what about ordinary folks that have worked int for the same company for 30 years, were given a severance and now have to pay back 98%?

    This act/law will give Fidez a mandate to change or repeal any laws that they do not see fit, going back to when ever they want. Very dangerous.

    From a bigger picture point of view, depending on how many times this is done in the next 4 years, it pretty much makes govt useless as the next party will just change the laws they do not like that are passed 2010/11/12 etc.. so and so forth. Making governing and passing laws just a waste of time.

    Populations political desires are constantly in flux as seen in the swing from left-right wing parties. This is setting a very bad precedent.

  • Rolrox

    Retroactive to 2005? And if the money isn’t there
    anymore, what then? Cannot tell what is more
    ludicrous the swingeing 98% or going back 5 years
    where nobody could have planned for such.

    Agree with Palanta, is there no concern for
    credibility? Come invest in HU, and 5 years after
    your employees leave, they might still get a tax
    bill for 98% of their exit packages (yes, I know
    that’s not currently the legislation, but once a
    precedent is set that doing the unthinkable is
    okay, they the skies the limit).

    Please Fidesz guys, if you’re reading this, focus
    on the future and not continuing to paint the
    country into even more of a corner than your

  • Viking

    Yes, they are setting a very nice precedence to be followed by the coming Governments
    Every time there is a change in Government, the previous Government politicians will be taxed to death, just to give back and show who has the power now
    Look at the time table now:
    a) One has for 5 years received money, which was totally legal
    b) Fidesz change the law from January 1st, 2011
    c) You get 3 months to pay back what you received over 5 years ago, and pay the taxes valid at that time
    I think/hope this type idiotic law/legislation can be challenged in European Courts, then there are actually big Human Rights issues here, with the State one-sided changing the rules how they want
    And then of course we have the issue with that Fidesz is not doing anything with the cost-side of the State, just trying to get some temporary money for next year budget
    So what will they do next year?
    Raise all taxes to 98% retroactively from 2006 for the few tax payers in this country?
    No wonder I recognise this lot who made Hungarian wine expensive in their last reign (1998-2002) by demanding every wine bottle has a tax-mark on it and, for a short time before the courts killed it off, demanding that you only could have one bottle open of each type in a bar/restaurant
    Very smart for those who wanted to greet a bus-load of guests with a glass of palinka or pezgő
    Fidesz is just your worst nightmare of the Tax Man personified. They will do anything to make your attempts making business into pure hell

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