Hungary cooking something up for the retail sector and it smells foul

The “best friend" of international retail chains, a ministerial commissioner in charge of trade policy at the Prime Minister’s Office, has spoken to the paper late last week so that the multinational companies would not forget who’s boss. This is not out of the blue, similar remarks are made in every few months.

Kristóf Szatmáry told the paper:

The government believes it is justified to further reduce via new market measures the competitive disadvantage of Hungarian businesses in retail trade. If necessary, the state will interfere in market processes in several areas for the sake of the consumer’s convenience, the interest of employees and the development of retail sales and the national economy.

He thinks the Economy Minister’s proposal made in 2014, which penalises retail companies that constantly make losses, has worked and it urged multinational retail chains to pursue a fairer tax payment behaviour.

We have recently had a report about this matter:

Some of the large chains have been funnelling untaxed revenues out of the country for years, while they hardly paid corporate income tax, because of the reported losses. Having accumulated several tens of billions [of forints] worth of losses over long years, all players with significant turnover reported profitable operation last year. This is an acknowledgement that they were evading taxes before

, Szatmáry said. Although he did not name any company he was most likely referring to Tesco.

Szatmáry said there was a strong correlation between the threat of being closed down (due to loss making) and the sudden emergence of positive balances, which proves that government measures influencing the market do make sense.

He also noted it is worth standing our ground even against Brussels which opened infringement proceedings against Hungary over nearly every single measure that affected the retail sector. The ministerial commissioner said proceedings are currently in a stage of correspondence."We will possibly need to amend the legislation but we will not allow the requirement to participate in fair public burden sharing via some kind of restriction to disappear."

Possible steps

Although Szatmáry did not mention specifics, he said “proposals containing novel requirements in several areas are expected to be discussed by the cabinet in the autumn." These, he added, would also address the question of labour shortage.Sectoral requirements aimed at resolving the migration of manpower or the problem of staff shortages in large stores could be put on the agenda in the near future, the paper said.

In view of this and previously disclosed information the following measures could be considered:

• Mandatory employment quota, under which at least one staff member per 70 square metre, engaged in commercial activity, must be present in the shopping area during opening hours.
• Mandatory minimum ratio of locally produced goods in certain product groups. According to previous reports, the Prime Minister’s Office and the Ministry of Agriculture would require large stores to make sure at least 60% of their goods are locally produced. In the first round the new obligation would be applied on milk and apples.
• There were reports in May that the cabinet planned to impose yet another levy on retail chains with large annual turnover in 2017. This would be yet another punitive tax analogous to a Polish levy which is planned to be imposed on trading companies with monthly revenues of at least PLN 1.5 million (HUF 105 mn), whereas smaller stores with lower sales would be exempt.

• Tags:
• economy,
• companies,
• retail chain,
• commerce