Hungarian lawmakers pass key laws before summer break

New ombudsman system

The government has decided to integrate the ombudsman’s office, introducing a single ombudsman with two deputies rather than the current four. This will ensure more efficient enforcement of citizens’ rights both at home and at international forums, said Máté Szabó, Hungary’s ombudsman for civil rights, in an interview with MTI late in June.

Hungary’s “much divided" ombudsman’s office is an ill-considered copy of the Swedish model, in which a chief ombudsman coordinates several other ombudsmen, he added. Szabó insisted that in the Hungarian system the four ombudsmen had “simply been put in the same office", having to compete for resources and media coverage thus reducing the efficiency of their work.

The ombudsman and the two deputies are elected by two-thirds majority for six years. The ombudsman may launch proceedings on suspicion of a serious infringement of basic rights not only at state institutions but also at banks and corporates. At institutions not categorised as authorities, the ombudsman may step in if the infringement affects larger groups, but his only jurisdiction would be to request information, while he would not have the right to conduct an inspection.

Government will move from Parliament

By 2014 the government will move from the Parliament building to a yet unidentified location; and an underground parking garage and a park will be built on Kossuth tér (square). The winning plan in an architectural tender invited in the spring of 2007 envisages a visitor centre, parks, tree lines on the square and pathways to the bank of the Danube. There is no information as to where the government would move to, but János Lázár, head of the ruling Fidesz party’s parliamentary group, said the state does not have a few billions of forints for this purpose at the moment.

HUF 250 bn budget freeze

Hungary’s Prime Minister Viktor Orbán in February approved the freeze of HUF 250 billion of budget funds to protect fiscal stability. Later it was proposed to permanently cancel funds from budget spending and lawmakers approved the proposal yesterday.The move is to lower spending at ministries by HUF 187 bn. In the preamble of the law amendment the government acknowledges that the freeze was necessary because certain tax revenues are likely to come in shorter than originally planned and some spending items will exceed the earlier targets. Previously, Economy Minister György Matolcsy said the freeze, tantamount to nearly 1% of Hungary’s GDP, was necessary to create a buffer for unforeseeable turbulences in the world economy.Green light for REITs

Highly complex but extremely important changes were made to legislation on Real Estate Investment Trusts (REITs). Under the approved law, REITs may be incorporated in Hungary.

The point of the new legislation is that regulated real estate developers and investors will be exempt from local business taxes and corporate income tax if they enter a deal of sale, rent, operation, management or asset management with a property they own. A condition to tax exemption is that this “szit" or REIT is a public limited company listed on the stock exchange - which could give a boost to the Budapest Stock Exchange (BSE) too -, but it is serious entry filter that the REIT must have a startup capital of at least HUF 10 billion. Former Finance Minister János Veres wanted a lower threshold at HUF 3 bn, but his amendment proposal was not supported.

Another key condition is that at least one fourth of the REIT’s shares must be held by small shareholders. The bill says the REITs cannot keep their profits, which will be fuelled by the tax exemption, in the company, and they are obliged to pay 90% of their profit in the form of dividend every year. Note that as of January this year there is a 16% tax on dividend, so the state is not the generous uncle here.

The government expects this new regulation to rev up the real estate market and that those profits that are currently seeping out of the country via offshore deals will be wooed back to Hungary thanks to the tax breaks.

Compared to the original bill, two highly important changes were approved that really have the potential to make Hungary a regional real estate hub. One of these is that the project companies to be set up by the REITs may also be foreign-registered businesses. The other is that the REITs may invest also in foreign real estate.

Under the original proposal tax exemption would have been available only for Hungarian investments, but the new law may attract a lot of foreign investors that would like to invest abroad but will tax in Hungary.

“Chips tax" from September

The law on the public health product fee, dubbed “chips tax" will take effect on 1 September. The new levy will be slapped on packaged foodstuff authorities deem “unhealthy". The measure may boost the price of certain products by up to 50-60%. The bill does not say what criteria were used to select the affected group of products and why only those packaged will be taxed.

The affected products are those with excessive salt, sugar, carbohydrate and caffeine content, such as potato crisps, chocolate bars and energy drinks. The cabinet expects HUF 5 bn revenues from the new levy this year and HUF 20 bn from 2012.

The tax is HUF 5 / litre on soft drinks, HUF 250 / litre on energy drinks, HUF 100 / kilogram for packaged sweets and snacks and HUF 200 / kilogram in the case of food flavourings.

The tax is payable by its producer or those who market it first in Hungary (if the product is imported). The seller is exempt from the new levy if the sold volume of the given product does not reach 50 litres or 50 kilograms a year.

Under the law soft drinks with fruit content below 25% will be subject to the tax, and also drinks that contain more than 8 grams of added sugar / 100 millilitre, except for concentrates and syrups.

The levy will be slapped on energy drinks that contain more than 10 mg of caffeine / 100 ml. Salted snacks will qualify if their salt content is over 1 g/100 g. The tax will be not payable on baby foodstuff, ketchup, mustard and salted condiments with salt content smaller than 15 g. Soups, sauces and dips will also be exempt.Meanwhile, a proposal to raise the excise tax on tobacco products was squashed. According to index.hu’s calculations this strips the budget of some HUF 22 bn next year, not to mention the hypocrisy in taxing a soft drink with sugar content below 25% and not hiking the excise tax on tobacco, which will be inevitable under EU regulations.Sports hooligans in the cross-hair

The new penalties - aimed primarily at football hooligans - include sentences of up to two years for invading playing areas or throwing projectiles on to the pitch, and up to three years for group violence, carrying arms, or repeat crimes.

In an extension of the scope of the previous law, vandalism and violence not just in stadiums but also on the way to and from venues could now also lead to criminal prosecution as well as stadium bans.

The perpetrators may be detained and their prior arrest may be ordered. A fine between HUF 200,000 and HUF 2 million may be imposed on them too.

Fan behaving disorderly at any game will be registered and could be banned from these events in the future. From 1 September when most of the new laws come into effect, spectators at games will enter venues on the condition that they are aware that they must show their personal identification if requested as well as their being recorded on security cameras. For high risk games, tickets will be sold to fans registered with their clubs. The organiser of the game will have the right to hold the troublemakers removed from the event for up to three hours until the police arrive.

Stricter Media Act

The most important modifications to the Media Act approved last December are:

Unpaid fees and fines due for the National Media and Communications Authority (NMCA) classify as public debt and those who owe these will be barred from frequency tenders.

The president and vice president of the NMCA will be entitled to their 12-month net pay should they leave their post, for under their contract they are not allowed to take another job for a year after their departure.

The Media Council will decide annually how many public radio and television channels should be operated.

The NMCA will not have the right to request a journalist to reveal his/her source, citing the interest of national security, defense of public order or the need to prevent or investigate criminal acts. Only the courts and law enforcement authorities will have that jurisdiction.

The president of the NMCA may create decrees on the rules of frequency allocation and usage and on the right to alienate frequency usage rights.

You say no to public work, you say no to your benefit

Jobseeker’s benefit in Hungary will be available for 90 days instead of 270 days currently. The new public work programme is aimed to “reactivate" 200,000-300,000 people and lead them back on the labour market. The main incentive for the inactive population is that those who do not accept the offered public work will lose the right for the benefit. The location of the job may be as far as three hours’ drive from the residence of the public worker. If it is even farther, the employer is obliged to offer the worker a stay. If one is fired from public work, there goes the right for the benefit.

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