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VOL. 22. NUMBER 02

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‘HOLDING OUT IN THE WEST AND OPENING IN THE EAST’ The Hungarian Investment and Trade Agency helps the government’s ‘Eastern Opening’ policy to enter new, dynamically growing markets, according to the new chairman of the agency, János Berényi. He likens HITA to a ‘mini foreign trade ministry’, and says he tries to manage it as if it was a corporation. 08-09

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SOCIALITE

Q&A

E−till system in shambles

Promoting creative industry

The embattled online cash register system was edging towards a viable state when the regulator decided that 80,000 tills don’t meet legal standards. All parties are flustered; businesses and tax revenues are in peril without any solid explanation. 15

Design Terminal, an NGO for the creative industry, has become a budgetary institute. The changes bring a longer name, a big budget, plus a seven−year plan to help talent and attract capital.

Zoltán Hegymegi− Barakonyi, managing partner of Kajtár Takács Hegymegi− Barakonyi Baker & McKenzie law firm.

28-29

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Budapest Business Journal | Jan 31 – Feb 13

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THE EDITOR SAYS

DESPERATELY SEEKING ENEMIES The mobilization promised last October is unfolding before our eyes, as four years of belligerent rhetoric is finally building up to an actual ‘battle’ in the form of the general elections. Not willing to ease the momentum, the government is going out of its way to identify as many enemies as possible. It’s interesting to see the different realities that determine the lives of Hungary, its neighbors and allies. U.S. President Barack Obama is calling for an end to the derisive partisan politics that have already led to a government shutdown from the most ineffective congress in the history of the country. For the States, the biggest challenge is obtuse political opposition that has made a life mission out of obstructionism. In the meantime, the warscape that Viktor Orbán is broadcasting as a concept to his camp has become an all too vivid reality in the Ukraine, where the authoritarian drive of the governing political forces is being met with extensive riots that have already led to several fatalities and numerous injuries. As events evolve, there is a painfully realistic chance of an genuine civil war just east of our borders, and one that doesn’t only exist within the heads of a few. But, since Orbán’s verbal arsenal is limited to keeping troops motivated in times of strife, he has so far failed to

develop speech patterns that would be fit for peacetime. No wonder he has spent all of his governance rallying enemies, the more the better, even if there was no reason for antagonism. As such, the ‘axis’ of the forces that are busy conspiring against Hungary as a top priority on their daily agendas includes the rating agencies, the banks, international financial organizations, Brussels, Washington, the political left abroad, not to mention the political left at home, the loyal, treacherous proxy of all the external forces. The fact that these sides have seldom actually wanted to do the things they are accused of, like taking away social benefits, forcing the introduction of new taxes or going against the government’s centerpiece drive for utility cost reduction has never really bothered anyone. It is no surprise that stoking paranoia is the central theme for the campaign, the main message being “look at all we’ve given you. If those others win, all of this will be taken way.” In contrast, the political opposition has yet to give existing and potential supporters a message to rally behind, because their promise of peace is easily trumped by the will to reach scramble−readiness against real or imaginary enemies. To quote a classic song: “Peace sells, but who’s buying?” Then again, why would anyone change a winning formula?

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Once more, the government has proven that even if, whether out of choice or necessity, you go along with the sweeping changes that tend to happen, you fall flat on your face just as soon as the ground has been yanked from under your feet. One after another, the government is passing on the costs of its poorly conceived and poorly implemented measures to other parties. In the latest installment of what has become a very familiar format, the licenses for the hottest selling linked cash registers were revoked just a month after the system was supposed to be in place. All the companies that did what was required of them, to act as law− abiding entities in the eyes of the state, are now alternating between scratching their heads and shouting in anger at yet another situation where, through no fault of their own, they are the ones at the receiving end. It was obvious from the very start that, as always, the plan to put an end to evading taxes in retail by giving the tax authority inspection channels was rushed, under− prepared and little more than an illusory bunch of ideas piled into a law overnight. The introduction was delayed over and over again as even the Economy Ministry yielded to the stubborn reality, all the while attributing the blame on sluggish providers. There was, however, no change in the tried and tested bullying method, when the way to win in a losing game is to change the rules after the fact and make someone

else bear the costs. This time, it’s 80,000 businesses that decided to play along. These include a broad range of retailers that are already reeling from losing their tobacco trade to the state monopoly and which have now bought a brand new licensed device that, as it turns out, isn’t up to par after all. It also includes a company that went from being the market leader to essentially nothing, since the license cancelation is most certainly a death sentence. All this, because the institution tasked with the regulation of the matter is for some reason still conducting tests of devices that it has already deemed fit for use. Now, when the system is formally up and running. As for the manner of finding the alleged security gap that paves the way for dodging tax payment? If the accounts are to be believed, it would largely compare to sending four consecutive crews on to a structure with jackhammers and going “a−ha” when the fourth one manages to make a dent. All this has fallen on the shoulders of the service industry to make them play nice and put an end to all the common anomalies that permeated the system and resulted in regular tax losses. Well, playing nice almost seems to be the more dangerous option in this case. Whatever you do, even if you want to play along and be part of the change, you’d better have a fallback plan in place.

IT WAS OBVIOUS FROM THE VERY START THAT, AS ALWAYS, THE PLAN [...] WAS RUSHED, UNDER-PREPARED AND LITTLE MORE THAN AN ILLUSORY BUNCH OF IDEAS PILED INTO A LAW OVERNIGHT

BBJ

1 News

NEWS

Speaking of ﬁgures: the most important 07 macro data

macroscope

THE DEBT OF POWER

GERGŐ RÁCZ

“Without the Paks nuclear power plant, there is no economy, the situation is that simple,” Prime Minister Viktor Orbán said on public radio after the announcement that Russia’s Rosatom has been picked to expand the plant. The Russians are also financing 80% of the overall budget with a sum of approximately €10 billion. State secretary János Lázár said that the expansion would increase the country’s annual gross domestic product by up to a whole percent, while Hungarian companies can expect a 40% share in the overall implementation. There are currently only estimates about whether the payoff off the Paks project will be sufficient to recoup expenses and if the country can stay on its designated debt−cutting trajectory. Since the planned loan amounts to around 10% of GDP, calling it in a lump sum would boost the country’s debt total to 90% of GDP from the current 80%. But even if the funding is more evenly distributed, the loan could increase public debt by an annual 1% of GDP during its 30−year maturity period. The interest conditions haven’t been finalized, but the latest – unsourced – press reports say the rate could be anything between 3.9% and 5%. RELAXED STRINGENCY The government has gradually become less intent on subordinating every policymaking concern to debt reduction, something it set out to do when it first came to power. While it made it a constitutional requirement at first to only pass annual budgets that incorporate a reduction of debt levels, economic reality softened this stance and led to provisions that allow some leeway. This reality means that while Hungary can boast one of the biggest annual debt reductions on

STORY HIGHLIGHTS ■

Costs of Paks expansion amounts to 10% of GDP ■ Doubts about whether the immense expenses will be recouped

the year in the third quarter of 2013 with a 1.3 percentage point cut, the total is still above 80% of gross domestic product. The efforts thus far have achieved keeping the debt level stagnant only, even though the 2011 confiscation of some HUF 3 trillion in private pensions funds, or around 10% of GDP, was supposedly earmarked largely to pay off debt and reduce reliance on foreign financing agents. As László András Borbély, deputy chief executive of the state debt manager ÁKK, told reporters, his agency would soon release a final stock of the managed pension fund wealth, since the budget has essentially been depleted, without having a marked impact on overall debt. It is also difficult to conceive how the debt could be reduced in the future considering the government has further ambitious items on its shopping list. The latest reports say there are plans to buy Budapest Airport, the operator of the international airport at Ferihegy, while the delegation signing the Paks agreement also saw talks about Hungary buying troubled steelmaker ISD Dunaferr from its owner, Russia’s Vnesheconombank. Although there are currently no specific targets discussed, it is also clear that the

STATE SECRETARY JÁNOS LÁZÁR DISCUSSING PAKS AS THE “BEST DEAL OF THE PAST 40 YEARS”

investment. As an obvious option, there is Germany as a potential export destination after Chancellor Angela Merkel’s government decided on a gradual but complete phase−out of atomic power from the national energy mix in the wake of the Fukushima disaster in 2011.

within the borders,” he said. The domestic utilization of the generated power is all the more significant, because according to Hungary’s long− term energy strategy ratified by Parliament in 2011, electricity must also gain a bigger role in fueling public

WITHOUT THE PAKS NUCLEAR POWER PLANT, THERE IS NO ECONOMY, THE SITUATION IS THAT SIMPLE state would be interested in buying the local assets of any international banks that are planning an exit. RECOUPING OPTIONS It is currently unclear and can only be estimated how Hungary will be able to recoup the expenses of the Paks

Orbán said the government is taking the German angle into account, but doesn’t consider it a priority for the time being. Before thinking about exports, “Hungary must strive to make sure that its domestic electricity demand is mainly covered with power produced

transport and a large percentage of this power is to come from Paks, he added. Lázár said that Hungary would only begin payments on the loan once the expansion is completed, meaning there is no immediate issue about debt. He also stated that it is “inconceivable” for the investment not to bring in its costs.

Photo: Lajos Soós / MTI

Hungary has fundamentally reshaped its relationship to Russia by picking state− owned Rosatom to implement the expansion of the Paks nuclear power plant. Besides the political implications, the immense costs of the project mean the government’s crusade against public debt has been suspended and it is unclear whether the expenses can ever be recovered.

04 News

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NEWS

IN BRIEF

Budapest Business Journal | Jan 31 – Feb 13

Relating to Russia isn’t a simple matter for Hungary and its people. My thinking is that there is no way to change the past, but the future can and should be changed Prime minister Viktor Orbán supporting the government’s decision to sign a deal with Russia for the expansion of the Paks nuclear power plant.

THE DATE IS SET

ECONOMY FRANKLIN TEMPLETON INVESTMENTS’ HUNGARIAN HOLDINGS CLIMB IN Q4 U.S.−based Franklin Templeton Investments raised its holdings of Hungarian government securities by almost 6% to $12.4 bln in the fourth quarter of last year, business daily Napi Gazdaság said. Franklin Templeton Investments’ share of Hungary’s central budget debt rose above 12.2% at the end of December from 11.7% three months earlier. Holdings of forint−denominated bonds in Templeton funds increased 19.7% during the period. RECORD HUF 118 BLN FOR R&D IN 2013 A record HUF 118 bln in grant money was paid out for research and development in Hungary last year, state secretary Zoltán Cséfalvay stated at a press conference. European Union funding accounted for HUF 96 bln of the grant money and state co− financing for HUF 22 bln. R&D funding will come to HUF 706 bln during the 2014−2020 EU budget period, double the amount in the previous seven−year fiscal cycle, he said. Hungary has committed to raising R&D spending to 1.8% of GDP by 2020; this remains an achievable goal in Cséfalvay’s estimation. TREASURY MANAGES MORE THAN 27,000 BABY BOND ACCOUNTS The Hungarian State Treasury now manages 27,258 Start accounts,

which parents must open to be eligible for “baby bonds”, National Economy Minister Mihály Varga told state newswire MTI. The balance on the accounts is HUF 4.3 bln, Varga said. Since 2006, the Hungarian State Treasury has made available the HUF 42,500 start−of−life subsidy available to all Hungarian−born citizens who reside in the country. Parents may contribute to the bond until their children turn 18. The first such bond was benchmarked to the five−year government bond. The newest bond, available from last December, pays three percentage points over inflation. The Treasury recently took over exclusive management of the subsidy. Earlier, the accounts could be opened at banks and savings cooperatives. At the end of 2012, there were about 179,000 Start accounts, data from the Treasury shows.

DOMESTIC NEXT ROUND OF UTILITY CUTS COMING PRIOR TO ELECTIONS The retail price of gas could drop ﬁ rst, already in the spring, and prices of power and district heating could be cut probably later, but still before the end of the year, parliamentary group leader of governing Fidesz party Antal Rogán said before a meeting of the group. Fidesz is timing the ﬁ rst round of the cuts to occur just before the elections in April. Rogán announced the decision by telling the public that the cost reductions will only happen if his Fidesz party wins reelection at the vote,

Photo: Lajos Soós / MTI

President János Áder announced on January 18 that general elections would be held on April 6, the first day permissible under current law. In response to the announcement, various opposition party members publically displayed confidence and no surprise. A statement from MSzP party president Attila Mesterházy, who tops the left−wing coalition ticket, said that an April 6 election would allow voters to “dismiss the failed Orbán government as soon as possible”. Former prime minister/ current Together 2014−Dialogue for Hungary party president Gordon Bajnai chimed in with, “Viktor Orbán’s regime is equally under threat from the joint list of the alliance to overthrow the government and by all the dirty laundry that has been made public in connection with the expansion of the Paks nuclear power plant.”

Numbers in the news

1,400

VAT fraud cases were launched by the tax office last year; the audits revealed that businesses defrauded the state of some HUF 79 bln last year.

decrease in revenue from VAT and excise tax on tobacco in 2013 from a year earlier, falling to HUF 425 mln.

otherwise the parties currently in opposition will do away with the achievements reached so far. The government mandated two utilities price cuts last year that saved households 20% on their bills. HUNGARIANS THE LEAST HAPPY IN OECD Hungarians are the least satisﬁed with their living circumstances according to a study released by the Organization for Economic Cooperation and Development. On a scale of 1 to 10, Hungarians ranked themselves at 4.7, while the second worst position went to Portugal with 5 points. Switzerland took the top spot with 7.8. Despite the glumness, the perception survey showed far better results in other areas, such as job security, where Hungary is among the top 10 in the surveyed countries, while still not being among the nations where respondents say they are systematically overworked. HUNGARY, JERSEY SIGN TAX INFO EXCHANGE AGREEMENT Hungary and Jersey have signed an agreement on the exchange of tax information at the Hungarian embassy in London, the National Economy Ministry said. Such agreements signiﬁcantly narrow the room for tax evasion, the ministry said.

POLITICS MESTERHÁZY CONFIRMED AS OPPOSITION FRONTRUNNER Delegates from the opposition socialist MSzP conﬁ rmed party chairman Attila Mesterházy as

candidate for prime minister at the 2014 general elections. Mesterházy, after claiming essentially 100% of the party’s support, promised that upon winning the elections, the opposition bloc dubbed Összefogás (unity) will, under his leadership, remedy the three main deficits generated under Viktor Orbán’s Fidesz government, those of democracy, social affairs and the economy, without promising “entry to Canaan” in the process. BRUSSELS ASKS GOV’T OPINION ON COMPLAINT ABOUT E.ON GAS BUSINESS PURCHASE The European Commission (EC) has sent to the Hungarian authorities a complaint regarding the Hungarian state’s purchase of the Hungarian gas business of E.ON last autumn, Antoine Colombani, an EC spokesman for competition affairs told MTI. The complaint was fi led by the opposition socialist party MSzP, claiming that the government paid far over the realistic value for the E.ON business thus the purchase can be classified as state fi nancing prohibited by EU regulations. The EC step is general practice, and is designed for the Hungarian government to formulate its position on the complaint, the spokesman said. The state− owned Hungarian energy group MVM paid HUF 281 bln for the Hungarian gas business of German electricity utility company E.ON in a deal closed October 1, 2013. MVM paid HUF 260 bln for the business and an additional HUF 21 bln for the company’s cash stocks and tax refunds.

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News 05

Budapest Business Journal | Jan 31 – Feb 13

COMPANY NEWS

Hungary’s government made an offer to the Russians for steelmaker ISD Dunaferr during a recent state visit to Moscow, local daily Dunaújvárosi Hírlap said on its website. Government officials earlier confirmed ISD Dunaferr had been discussed during the visit to Moscow. Talks between the government and Russia’s state−controlled Vnesheconombank, ISD Dunaferr’s owner, could continue in February.

GRUNDFOS INAUGURATES HUF 3.8 BLN PRODUCTION LINE

Hungary’s government has not excluded the repurchase of Budapest Airport, the operator of Liszt Ferenc International Airport Budapest, state secretary for asset policy Sára Nemes Hegmann told business daily Napi Gazdaság. Hegmann said the renegotiation of the airport contract would take place only in the next government cycle. Hungary’s next general election is slated for April 6. The Public Sector Pension Investment Board of Canada is the biggest stakeholder in Budapest Airport at present. Passenger numbers at Liszt Ferenc International Airport rose slightly to 8,520,000 last year from 8,504,000 in 2012, Jost Lammers, who heads airport operator Budapest Airport, told daily Magyar Nemzet. Lammers said Liszt Ferenc’s Terminal 1 would remain closed for the time being. He added that Budapest Airport was waiting for an outside investor to build a cargo base and an airport hotel. Terminal 1 was closed and the cargo base investment postponed after troubled national carrier Malév went bust early in 2012. Lammers forecast a 3.4% increase in passengers at Liszt Ferenc International Airport in Budapest in 2014 if nothing unforeseen happens, he told state news agency MTI.

Photo: Attila Kovács / MTI

GOV’T CONSIDERS BUYING BUDAPEST AIRPORT

STATE SECRETARY PÉTER SZIJJÁRTÓ AND GRUNDFOS PLANT DIRECTOR CSABA UDVAR

OTP Bank announced the registration of a capital increase at its unit Bank Cen− ter No. 1. Registered capital of the unit was raised to HUF 7.3 bln on December 30, 2013, OTP Bank said. Following the raise, OTP Bank held 90.14% of the unit and INGA Kettő owned 9.86%. Bank Center No. 1 had registered capital of HUF 6.79 bln at the end of 2012, public records show.

Danish pump maker Grundfos has inaugurated a HUF 3.78 billion production line at its base in Tatabánya. Grundfos Magyarország Gyártó managing director László Török said the unit was winding up a longer investment with the inauguration. In 2010, the company decided to bring production of SaVer variable frequency motors and next−generation Poseidon pumps to Hungary, he explained. Eighty people work on the new production line at present, but the number will rise to more than 100 when a third shift is added this year.

Hungary’s CIG Pannónia Life Insurance has decided to close its Bucharest− based Romanian unit, Tisia Expert SRL, the Hungarian parent company an− nounced. CIG Pannónia Life Insurance said that it decided to close 100%−owned Tisia Expert because the unit was unable to generate sufficient sales.

Hungarian drugmaker Richter said the European Commission granted it mar− keting authorization to extend the use of Esmya, used to treat uterine ﬁbroids, to up to two courses of three−month treatment. The duration of treatment was originally limited to three months. Richter applied to extend the duration of the treatment period based on the results of clinical tests.

Hungarian road haulage company Waberer’s has wound up its vehicle ﬂeet registered in Romania, Romanian regional daily Hargita Népe said. CEO of Waberer’s Romania Zoltán Barcza said more than 200 trucks were replaced last year of the vehicles belonging to the Miercurea Ciuc base, and the new vehicles purchased to replace them will not be registered in Romania, but at the group’s new company established in Hungary.

Engine output at carmaker Audi’s plant in Hungary rose by about 10,000 to 1,925,636 last year, according to statistics released by Audi Hungária Motor. The Győr facility saw some 42,851 vehicles come off the assembly line last year, a 28% increase year−on−year. Employment at Audi was also up, with rolls reach− ing 10,337 as of December 31, a 19% jump y.o.y.

Automobile upholstery maker AWF Autóalkatrészgyártó has begun a HUF 1.8 bln technological investment at the company’s plant in Sárvár. As a result of the investment AWF Autóalkatrészgyártó would hire 30−40 more workers by the end of 2015. The company serves as a supplier for Audi, Mercedes, BMW and Porsche vehicles.

GE Hungary is working with partners to develop solar−powered LED street lighting supported with a HUF 571 mln grant from the Research and Technolo− gy Innovation Fund, General Electric said. The lighting system generates more energy on average than it consumes, GE said.

The Hungarian unit of Germany’s Balluff, a maker of sensors used in automated industrial applications, is spending HUF 163 mln on a research and develop− ment project. The unit won a HUF 62 mln grant from the Research and Techno− logical Innovation Fund for the project.

Vienna Capital Partners (VCP) will buy broadsheet Népszabadság, business daily Világgazdaság, sports daily Nemzeti Sport and eight regional dailies from publishers Ringier and Axel Springer, the companies said. Ringier and Axel Springer are selling the publications to comply with competition requirements for the planned transfer of their holdings in Hungary into a joint venture called Ringier Axel Springer Hungary. The portfolio of the joint venture will comprise mainly tabloids and women’s magazines.

Continental Automotive Hungary will have invested HUF 15 bln in its inno− vation and job−creation program for 2009 to 2014 with the implementation of another HUF 2 bln in European Union and government funding. This round of investment will be used for expansion of facilities in Budapest and Veszprém; ac− cording to company officials, some 477 new jobs in total are to be created.

MKB Bank’s board has approved an HUF 80.2 bln capital raise. The capital will be increased through the issue of new shares subscribed in a private placement by existing shareholders. Majority owner BayernLB already paid HUF 79.1 bln for the shares on January 24. Czech energy works CEZ is issuing €470.2 mln in 3.5−year bonds exchangeable for the shares of Hungarian oil and gas company MOL, the company announced after pricing of the bonds. The issue is an appropriate way to manage the low liquidity of the 7% stake CEZ holds in MOL, CEZ spokesperson Barbora Pulp− anova told MTI Prague. British American Tobacco (BAT) will build a HUF 9 bln plant in Pécs. BAT’s existing plant in Pécs will continue to operate, said mayor Zsolt Páva. Output at the base in Pécs will double, making it Europe’s second−biggest cigarette manu− facturer, he added. Production at the new plant will start in Q4 2014, and about 90% of output will be exported.

Hungexpo, which hosts trade fairs at a venue in Budapest, had revenue of a little more than HUF 3 bln last year, up by HUF 300 mln from 2012. Revenue from trade shows Hungexpo organized itself accounted for 64% of the total. Turnover from expos organized by outsiders generated 28%. Hungexpo drew 500,000 visi− tors to events last year, and exhibitors rented more than 100,000 sqm of space. Hungarian agribusiness Babati és Társa is in ad− vanced talks on the plan− ning and construction of a slaughterhouse for hogs in Vietnam, business daily Napi Gazdaság said. The annual capacity of the slaughterhouse would be about ten times as much as Babati’s base in Hungary which stands at 78,000.

Luxury flat for rent in the City Center. Fully furnished, 2 bedrooms, 90 sqm, €1,200/month Contact: annah@freemail.hu

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News 07

Budapest Business Journal | Jan 31 – Feb 13

A YEAR OF CORPORATE SHARES TO COME? According to Equilor Fund Manager, the benchmark policy rate may drop to 2.5 % in the first half of this year. In H2, however, that trend may come to a halt or even reverse. National elections may increase the forint’s volatility. The FX loan relief plan may push the forint above a 320− euro exchange rate.

STORY from HIGHLIGHTS suffer the consequences of current ■

Equilor expects forex markets to turn increasingly volatile in as national elections approach ■ Emerging markets are becoming riskier, so the key rate cut policy of the central bank may come to an end

U.S. monetary policy. The Fed is going to embark on a tapering policy, which may drastically undermine the liquidity of emerging economies.

ANDRÁS ZSÁMBOKI

“2014 is going to be the year of corporate shares rather than the year of state bonds,” Zsolt Pillár, General Manager of Equilor Fund Manager stated in Equilor’s investment prognosis for this year. According to the fundamental analysis of the world market, U.S. industry may play the role of the engine of the world economy. Corporate profits in the United States are expected to reach unprecedented highs in 2014. Meanwhile, the central states of the EU will also perform better than they have in recent years. Emerging countries, however, may

HUNGARIAN FUNDAMENTS Last year’s central budget deficit may remain under 2.7 % of the GDP, a rate forecast by the Hungarian government. “Experiences of earlier election years show that a significant level of overspending can be expected in 2014, which could push the deficit above 3.2 % unless adjustments are made during the second half of the year,” András Szántó, manager of Equilor’s private investments branch told the Budapest Business Journal. Equilor’s management expects the key rate cut policy of the Hungarian National Bank to stop by Q2 of 2014, while the second half of the year may even see a key rate increase. Last year’s inflation reached historical depths due to the two−step reduction of utilities

fees and weak domestic demand. Equilor Fund Manager expects a 1.9 % CPI for 2014. CORPORATE SHARES: THE WINNING BET At the formerly depressed bonds market, the high interest rate premiums of emerging countries’ state bonds used to compensate for their risks. In the wake of Turkish, South African, and Argentinean events, however, the overall sentiment seems to be changing, which might affect Hungarian state bonds as well. “From the investors’ point of view, it is primarily the corporate bonds market which offers new possibilities,” Ákos Kuti, senior consultant of Equilor explained. Among the most recommended companies there will be technological innovators such as AMD or Lenovo, and 3D printer developers such as 3D Systems, Stratasys, Voxeljet, or ExOne. In addition, excellent opportunities can be expected from the Macao casino industry (Melco Crown, MGM, Las Vegas Sands), and from the currency exchange market (namely from the USD/JPY/EUR exchange rates). Certain raw materials such as crude oil and cocoa bean may become attractive investment targets as well. Among Hungarian stocks, MOL shares will be the most recommended.

Macroeconomic prognosis for Hungary

2013 fact

2014 prognosis

MACRO Speaking X of ﬁgures The Budapest Business Journal presents the most important macro data of the past fortnight.

2.85% is the new record−low base rate set by the Monetary Council on Jan 21.

HUF 229,700 average gross nominal earnings in Jan−Nov, 2013, a 3.8% increase from the same period of previous year

1.7% 2015 prognosis consumer price inflation in 2013

Government

Equilor

Government

Equilor

Government

Real GDP growth rate

0.9%

1.0%

1.7%

2.0%

2.3%

Consumer price index (average) Consumer price index (year end) Public ﬁnances balance

1.7%*

1.8%

1.9%

2.4%

2.8%

3.0%

Sovereign debt to GDP ratio Yield of state bonds (12 months) Yield of state bonds (3 years) Yield of state bonds (10 years) EUR/HUF exchange rate (Source: Equilor January 2014)

0.4%* −2.7%

2.5% −2.7%

−3.2%

3.0% −2.9%

−2.9%

79.6%*

80.5%

80.2%

3.04%*

3.25%

3.75%

4.01%*

4.0%

4.4%

5.71%*

5.9%

6.2%

296.97*

295

310

−2.6%

9.1% unemployment rate in Oct−Dec, 2013; the number of unemployed was 65,000 lower than a year ago

33,641 persons − natural decrease in Jan−Nov, 2013; 1,433 persons lower than a year ago

Sources: National Bank of Hungary; Central Statistical Office

Equilor

BBJ

2Business insight

HELPING TO GAIN A FOOTHOLD IN NEW MARKETS The Budapest Business Journal interviewed the new chairman of the Hungarian Investment and Trade Agency János Berényi right after he held a two−hour meeting with foreign trade state secretary Péter Szijjártó, where they discussed plans for the next two to three months. These included upcoming meetings of intergovernmental commissions on economic cooperation, such as a meeting in Baku on January 27. Long− term strategies are obviously not on the table with the general elections in April. Prime Minister Viktor Orbán appointed Berényi HITA chairman in December 2013. GABRIELLA LOVAS

How can you make use of your previous experience in this new position? A: Although HITA is a government agency, a bit like a ‘mini foreign trade ministry’, as a former manager of state− owned companies operating on the competitive market, I try to manage it as if it was a corporation. HITA’s main activities, foreign investments and export promotion, are closely related to the competitive sphere. Accordingly, we aim to introduce HITA as a new brand both in Hungary and abroad. We had a really good year in 2013 with investments made to the value of €1.2 billion, and a €420 million increase in export revenues with the assistance of the agency. In comparison, HITA’s budget last year was HUF 3 bln. Our most remarkable projects included Japan’s automotive safety systems and products supplier Takata, which has created 1,000 new jobs. HITA assisted the company throughout the whole investment process from the moment they contacted one of our regional offices. Other big projects, like the expansion of Korean tire maker Hankook and carmaker Opel, added 950 an 800 jobs, respectively. In 2014, we would like to achieve at least similar results. In our portfolio, we

have more than 100 investment projects; of these 30 are close to an agreement.

How can HITA contribute to the government’s ambitious ‘Eastern Opening’ policy? A: While our task is to implement the government’s foreign trade strategy, our motto is ‘Holding out in the West and opening in the East’. It means that we have to come to terms with the fact that it is almost impossible to grow in Hungary’s traditional export markets in the European Union. Our main goal here is to retain our existing positions. At the same time, we have to gain a foothold on new dynamically growing markets. The prime minister’s recent trips clearly reveal the main target countries, which include Japan, China, India and Russia. Beside that, the Balkan region and the CIS countries are also on our radar. At our meeting with the state secretary, we finalized the details of our trip to China with a delegation of 110 executives on February 12. We will also organize an Arab summit in Riyadh in March with the participation of 130−140 businessmen from a wide range of sectors. Hungary’s hottest sector now is the food processing industry and agriculture, followed by water management, the pharmaceutical sector and electronics. Several meetings of intergovernmental commissions are under preparation with countries like Qatar, Romania and China.

János Berényi, a qualified economist, started his carrier at regional railway company GySEV, where he was chairman and CEO from 1990 until 2002. Later he held executive posts at state−owned railway company MÁV and former national airlines MALÉV. Berényi was also active as a sport manager. He was, among others, the president of Hungaroring Sport Rt, the company behind the Hungarian Formula 1 Grand Prix, for ten years.

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2 Business

Budapest Business Journal | Jan 31 – Feb 13

These efforts usually bear fruit only after several rounds of negotiations. We must not forget the differences in business culture, consumer habits and the regulatory environment. Often there are administrative hurdles, and freight costs to far−away destinations can also be high. This is where HITA can assist companies to overcome all the obstacles. Prior to these trips, for instance, the agency organizes comprehensive management training through its SME Academy. There are more than 1,200 companies, which have attended events related to the ‘Eastern Opening’ policy.

What are the most successful areas of investment promotion? A: Shared Service Centers, which appeared in Hungary at the end of the 1990s, have created thousands of new jobs and attracted high−value added projects to Hungary. Currently, there are around 80 SSCs here, employing more than 30,000 workers. I believe that the quality of education is still high, Hungarians, especially the younger generation, speak foreign languages and labor costs are still relatively competitive in Europe. The inauguration ceremony of Computacenter’s IT service desk operation took place in Budapest’s Haller Gardens in January. The company, which is a UK−based provider of IT infrastructure services, aims to create 250 new jobs.

The unstable regulatory and business environment coupled with unpredictable economic policy has made foreign investors shy away from Hungary. What kind of feedback does the agency receive in that respect? A: I do not see a significant fallback in investments despite the sometimes− unjustified negative media campaign in some EU countries or critical remarks by the EU itself. HITA visits foreign companies operating in the country on a regular basis within the framework of our ‘After Care Program’. We often get positive feedback with many companies saying that they want to further expand in Hungary. Investors seem to accept, for instance, the flat−rate personal income tax, which has been a much−debated issue in Hungary.

I meant the sectoral taxes in the first place. A: Obviously, nobody is happy about that, but the government says that all businesses operating in Hungary

have to help the country to get out of the crisis. Sometimes we do have to explain ourselves, for instance in the case of fast changing regulations and the lack of skilled labor in some of the country’s less developed regions. On the other hand, foreign investors welcome the introduction of strategic agreements with the government. HITA has been approached many times by aspiring companies asking about the preconditions.

BACKGROUND HITA was established in January 2011 by the government to promote the international business activities of Hungarian smalland medium-sized enterprises and to encourage foreign businesses to invest in Hungary. HITA’s activities are controlled by the prime minister, as prescribed by law, via the state secretary for foreign affairs at the Prime Minister’s Office. Beside its central office, HITA has opened six provincial offices in large cities across the country. The agency operates in close cooperation with diplomats, promoting foreign trading activities in 49 countries all over the world.

IT IS ALMOST IMPOSSIBLE TO GROW IN HUNGARY’S TRADITIONAL EXPORT MARKETS IN THE EU. OUR MAIN GOAL HERE IS TO RETAIN OUR EXISTING POSITIONS

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10 2Business

Budapest Business Journal | Jan 31 – Feb 13

COMPLY TO SUCCEED Hungary is introducing a new element to its legal system from April. Corporate compliance is a common phenomenon for globally operating films, it is a system of rules and provisions that addresses and aims to prevent a broad range of malpractices within corporate life ranging from corruption to everyday nuisances. The Budapest Business Journal spoke with managing partner of Kajtár Takács Hegymegi−Barakonyi Baker & McKenzie law firm Zoltán Hegymegi−Barakonyi to discuss the benefits Hungarian companies can derive from having a corporate compliance scheme in place and the hurdles they should look out for. GERGŐ RÁCZ

This year a new law is introduced detailing the operation of corporate compliance in Hungary. What does this entail for businesses? A: Basically, it means that compliance and the related whistleblowing systems that global firms already have in place are to be adapted to Hungarian legal requirements. A complex compliance system covers a broad range of issues, from a code of ethics, and protection for those exposing wrongdoings, all the way to potential internal matters like sexual harassment. Globally operating listed firms have a legal obligation to have such schemes in place throughout the entirety of their global operation. In Hungary, it isn’t mandatory for the time being.

What does a smaller Hungarian firm have to gain from introducing a compliance system? A: Because many multinational corporations will only do business in other countries with partners that have compliance criteria in place that satisfy the requirements of their respective home countries’ regulators, compliance already distinguishes a firm as a possible supplier. For companies looking to work with major international firms, this is an indispensable element, not to mention the competitive advantage that is gained. It is also a notable improvement to corporate image. On the practical side, a well−operating system can serve to expose illicit corporate practices and the company will be the first to know about it. Management has the opportunity to remedy any malpractices and not have to be exposed to a situation where the authorities come and knock down the door.

STORY HIGHLIGHTS ■

Corporate compliance can prevent and address corruption and other violations ■ Effective compliance requires full endorsement from the management all the way down consumption

Is having these regulations and safeguards in place difficult to achieve and adapt to various countries? A: There are several key requirements to devising a compliance system. For starters, the management must fully embrace it and

Zoltán Hegymegi− Barakonyi heads the antitrust and competition practice of Baker and Mackenzie’s Budapest office. He is also the vice− president of the Hungarian Competition Association and a member of the Scientific Board of the Competition Law Research Institute at Pázmány Péter Catholic University, where he also teaches. He was educated in Hungary and the United States. promote it. We then have to identify risks of all natures and then we come to standards and controls, which is where you are laying out the actual rules. Then, you have to train your employees as well as the partners in the supply chain and also monitor the operation of the system. There are many possible slip−ups. For instance, pharma reps operating in various countries must be fully trained about how they can and can’t interact with the medical profession, which is a very slippery slope, even if there is no negative intent involved. Each story must be tailor−made for all companies and all countries. The important thing is that all these elements have to be in place, otherwise there’s no point bothering with the whole thing.

Are you confident that corporate compliance will become a significant element in how businesses work in Hungary, a country that is legendary for the strength of its shadow economy? A: I have to admit I would be surprised if it brought a change that affected masses in a short period of time. Still, this doesn’t mean that a reputable company should accept anything less. We have heard the excuse over and over for breaching the competition or anti−bribery laws: “everyone else is doing it, so why shouldn’t I?” This is not acceptable and companies must practice zero tolerance. I’m not naïve; ever since there were

GETTING RID OF CORRUPTION MUST START AT A VERY EARLY AGE AS PART OF GENERAL EDUCATION three people on the Earth, corruption has probably existed. Still, why is it that some countries can handle this? Look at Denmark, which has the best results in Transparency International’s corruption perception index. They didn’t come from the moon. Getting rid of corruption must start at a very early age as part of general education and we also need more general deterrents.

What do you see as problems with compliance systems that companies now considering introduction should look out for? A: Creating a legal basis, down to the letter with third party suppliers in countries where

the given corporation doesn’t have a subsidiary is crucial. Because the corporation must ensure the same levels of compliance in all reaches of its network, vendors included, if it doesn’t have a contract that lays out all possible issues and responsibilities incredibly speciﬁcally, it is prone to face consequences even if it was an external contractor that perpetrated some wrongdoing. Also, I have experienced that those who are the targets of whistleblowing are often mistreated; their rights should also be observed. I know of people who were accused and were then excluded from the process of the investigation, received no information about what was happening to them or what they can expect and that is highly unfair practice.

BBJ

3Special Report Predictable plea for predictability

No choice but letting it roll

TAX & ACCOUNTING An end to the hectic changes to the tax system is a promise that has been long awaited by businesses in Hungary. They now see some semblance of hope and are, as a result, more optimistic about their outlooks for this year.

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Budapest Business Journal | Jan 31 – Feb 13

TAX DODGERS: ALWAYS Although their room for maneuver shrinks, offshore tax dodgers still manage to keep one step ahead of regulators by constantly finding new ways to minimize tax payments. With the introduction of the Stability Savings Account, bringing the money back to Hungary will not be a problem any more, either.

the ‘customary’ bilateral double taxation treaties that also provide grounds for the exchange of information as well as bilateral tax information exchange agreements, typically between a tax haven and a country with an average tax burden.

BILATERAL TREATIES Hungary has concluded double taxation treaties with almost 80 countries so far, among them all EU and OECD member states. All of these include the possibility of information exchange, but in most of the cases oblige the other country to do so only upon the request of Hungarian tax authority NAV rather than automatically, GABRIELLA LOVAS says PwC tax partner Dóra Máthé. The automatic exchange of information involves the systematic and periodic In the global fight against tax evasion, transmission of ‘bulk’ taxpayer information tax authorities are moving from bilateral by the source country to the home country, to multilateral cooperation and from explains Máthé. It may concern various exchange of information on request to categories of income, such as dividends, an automatic system. Hungary signed interest, royalties, salaries and pensions. the most comprehensive multilateral Automatic exchange can also be used to instrument tackling tax avoidance, the transmit other types of information such as OECD’s Multilateral Convention on Mutual changes of residence, the purchase or sale Administrative Assistance in Tax Matters, of property and value added tax refunds. in November 2013. Besides that, there are This is the type of information exchange that has, in fact, a real deterrent effect. According to a 2012 OECD survey, 14 of the 80 countries do, however, provide information on Hungarian taxpayers automatically, under protocols agreed separately under double taxation treaties, says attorney Pál Jalsovszky. Neither the list of these countries, nor the type of information shared, has been made public though.

HUF

2.1 trn investigated in back taxes, only

17% actually collected*

SPEEDY PROGRESS IN THE EU The European Commission has sped up legislative work on the fight against tax evasion, primarily because EU tax revenues of up to €250 billion still disappear each year in various offshore centers, says Jalsovszky. The direction of EC legislation has also been influenced by the U.S. Foreign Account Tax Compliance Act to be introduced this year, on the basis of which the Internal Revenue Service will be able to automatically obtain bank account information on U.S. taxpayers. The automatic exchange of information was first introduced in the EU in 2005 through the Savings Directive. Currently, 26 countries apply the automatic exchange of information. Austria and Luxembourg are allowed, for a transitional period, to apply only a withholding tax with a 35% rate. Besides, the EU has concluded savings tax agreements with five neighboring countries: Switzerland, Andorra, Monaco, Lichtenstein and San Marino. The main limitation of the directive is that it is applicable only to the savings of private deposit holders, thus the anonymity of the account holder can easily be kept by opening a corporate account. In 2008, the Commission proposed a revision of the directive in order to capture payments made through trusts and foundations and to close other loopholes. In addition to the above treaties, the EU’s new Administrative Cooperation Directive, which generally entered into force in January 2013, will also introduce automatic exchange of available information in five

income categories from 2015, says Máthé. These are the income from employment, director’s fees, life insurance products, pensions, and immovable property. TRICKS AND LOOPHOLES How will these all work in practice? Full transparency is still more like a distant dream than reality, a private banker told the Budapest Business Journal. Even without trying to dig too deep, the BBJ could easily identify a number of tricks and loopholes to find a way around regulations against tax evasion. One way a taxpayer may be excluded from the Savings Directive is holding an account that is not impacted by the rules. By opening a bank account that bears no interest, no information will be provided on the savings. Banks have been quite innovative in creating savings instruments that are very similar to deposits in their nature, but the return they provide does not qualify as interest income as defined by the directive. Another option is to open an account in Austria, the last country to hold out against automatic information exchange. The Luxembourg government has already announced that it will end the transitional period and introduce the automatic exchange of information under the Savings Directive as of January 2015. Austria is expected to be able to resist political pressure to follow suit for at least a couple more years.

Private individuals owed

HUF

189.7 billion, businesses

HUF

1,910 billion*

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Budapest Business Journal | Jan 31 – Feb 13

S AHEAD OF THE GAME? The biggest part,

74.8% or

HUF

1,157 billion is impossible to collect as it is owed by now defunct companies.*

EXPERT OPINION

TAX PLANNING OR TAX FRAUD? Tax payers are not obliged to bear a higher tax burden if they have a legally possible option. Finding the borderline, however, between tax optimization and avoidance might be a real challenge.

n the Hungarian tax environment the question is often raised as to whether certain tax methods transgress the boundaries of legality. This is chiefly attributable to the Hungarian legal environment of taxation. Tax legislation is formed by two pillars: firstly, itemized tax laws set out specific tax rules for certain cases of taxation; secondly, substantive principles are applied in parallel, i.e. if the only aim of a non-standard method is to achieve a tax advantage, it is not applicable. The latter case is defined as the principle of the regular enforcement of law in Hungary and as the prohibition of

Gábor Kertész TAX EXPERT

so-called Treaty Shopping in international taxation. To take an example of indirect taxation, if a product is proven to be de facto transported to another member state, and it is transported back and the rules of itemized tax laws are otherwise observed, it may nevertheless be objectionable that this economically unreasonable method was chosen only for the purpose of avoiding VAT payment to the state budget. Although a tax shortage does not arise, as under normal circumstances the amount of paid VAT may be reclaimed, the entities involved nevertheless gained an advantage by not financing the amount of

BDO HUNGARY (TAX CONSULTING) tax. Would it follow that Hungarian case law does not permit any tax planning made in good faith? The situation is not that bleak, but particular care and caution is advised in the course of drawing up certain taxation methods. Staying with the above example, if an economically substantiated reason for applying a different method is available, the method would be justifiable. The used example is no coincidence, as the cited tax method is a focal point of investigations currently launched by the

NOTE: ALL ARTICLES MARKED E XPERT OPINIONS ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILIT Y

tax authority, where willful conduct and the category of tax fraud may also arise on the basis of negative tax audit findings. In such cases, in the course of cross-border transits and chain transactions, the budgetary VAT revenue may be lost anywhere in the chain, while other participants of the chain do not become aware of this, however, this may entail severe consequences for them as well. Accordingly and understandably, the tax inspectors assign a priority to the inspection of such transactions. Economic operators do business to gain a profit; therefore the planning of taxation is essential. On the basis of the foregoing, however, particular caution is advised when substantiating the economic rationale of certain transactions.

www.bdo.hu

* Tax dodging in 2013; Source: feketelista.hu

this seriously enough or obstruct the whole procedure outright by providing too general or simply useless information, such as, for instance, Cyprus. Finally, initiatives to fight tax evasion are hampered by conflict of interest, and there will always be one way or another to hide the assets of the wealthiest elite. Where do tax dodgers try to hide their money in the current regulatory environment? While there are no safe bets, Jalsovszky observed three main tendencies. Some still have faith in the distant exotic tax paradises. They believe that no matter how many treaties they sign, these countries will always do their best to sabotage information exchange. Another direction is Singapore and Hong Kong. Both countries are strong and well able to protect their own interests. In addition, they are far away from both the EU and the United States. The third tendency is moving assets to the aforementioned Austria. The other main issue ‘tax planners’ face is how to bring the money back home. In the past few years, there has always been some kind of amnesty available. The latest option, the Stability Savings Account (SSA), is an amnesty that offends several legal principles, pointed out Jalsovszky. He believes that this amnesty is not sustainable in the long run as it represents a gaping loophole. SSA holders may benefit from tax exemptions, while they do not have to justify the origin of these assets. At least HUF 5 million has to be deposited and the same individual can open an unlimited number of accounts. Tax liability arises only when a part or the total sum is withdrawn from the account, however, if What about double tax treaties? Hungary more, says Jalsovszky. A “glimmer of this happens after more than five years, the is expected to conclude such treaties with hope” for tax evaders is that information income is fully tax exempt. Other popular solutions include taking several more countries including well− exchange based on these treaties does not known tax havens. Thus, there are no work efficiently in practice due to a lack of director’s fees from companies outside the 100% secure offshore refuges that shelter capacity on the part of the tax authorities. EU or changing tax residency by moving to tax dodging and money laundering any In addition, many countries do not take Malta for a year or two.

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Budapest Business Journal | Jan 31 – Feb 13

PREDICTABLE PLEA FOR PREDICTABILITY The 2014 budget is the first in years that doesn’t include extensive changes to the tax system, indicating that the government is letting go of its practice of habitually tinkering with the system, something that often had business in despair. If the promise of a more reliable tax structure is achieved, enterprises believe Hungary’s economy can also take off.

STORY target HIGHLIGHTS the general population rather ■

Government ﬁnally promises predictable legal environment ■ Businesses optimistic 2014 could be a year of economic expansion

than businesses. Ideas that have been discussed for months now entail a beneficial value added tax rate for meat

the VAT underwent a general reduction to 20%, but instead of increasing consumption and boosting treasury revenues, stores adjusted to maximize their profits, pocketing the difference by keeping prices unchanged. This necessitated first taking the rate back to its earlier level and then, later, the Orbán government increased it to the current 27% (the highest in the European Union).

GERGŐ RÁCZ

Businesses have up to now resigned themselves to sounding like a broken record whenever they are asked what they think would be the key to making their lives easier and consequently, their operation more successful. Nearly 83% of a Deloitte survey’s respondents said the single most important change would be to achieve a greater degree of predictability in the tax system as the key to making the country’s economy more competitive. “In Hungary, 92% of respondents rated taxation−related unpredictably as very high, stemming from the frequent changes in legislation,” head of Deloitte’s tax department Attila Kövesdy said. European respondents were also mostly pessimistic about the calculable outlooks their various countries’ respective tax systems offer, but the average of 60% is by no means close to the Hungarian figure. CUTS FOR HOUSEHOLDS Government’s plans that could follow this year in terms of taxation will likely ADVERTISEMENT

naturally stems from the start of a new year is hard to say, but the business sector seems to share the general public’s optimism that this year will be better than the last. A global survey by financial consultant PwC found that 44% of company executives expect the global economy to grow this year, compared to just 18% in 2013. The overall positive attitude was reflected in the fact that 39% of CEOs said they are “very confident” of revenue growth in their own companies in the next 12 months. The Deloitte survey’s respondents said their top tip for expansion this year will be shared service centers, which continue to blossom, and the government is also supportive of companies that are launching support hubs through employment subsidies or making such companies strategic partners. The segment is already a significant factor, since 65% of respondents said they work at companies where parts or all of taxation−related affairs are handled by service centers.

The State Audit Office (ÁSz) thinks that products, following government drives to launch a general cut of the VAT on all essential foodstuffs. The measure is understandably one that will be handled with caution. Back during Ferenc Gyurcsány’s premiership,

For this very reason, experts have voiced concerns about whether the reduction of VAT on live pigs will actually result in lower prices for the end consumer, or if the potential savings will be absorbed in the production chain. A look through the changes implement this year shows that there are also a few smaller, but not inconsequential changes for the business sector. For instance, the terms for using the KATA system designed for small and individual entrepreneurs was expanded, companies need less stringent administration for deductible costs of business−related restaurant visits, and the cafeteria system of in−kind benefits has remained unchanged from 2013. HAPPY TO BE BORED Economy Ministry state secretary Zoltán Cséfalvay promised that after the action−filled policymaking habits seen in the first three years of the second Orbán cabinet, 2014 will finally bring the implementation of a “boring” annual budget. Whether it’s the government’s measures or the overall sentiment that

52.6% of the government’s 2014 tax plans are feasible,

47.4% are partially grounded. Partially grounded items include revenues from: VAT, ﬁnancial transaction taxes, telecoms tax and beneﬁcial tax schemes for small businesses.

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Budapest Business Journal | Jan 31 – Feb 13

E-TILL SYSTEM IN SHAMBLES

GERGŐ RÁCZ

Some 80,000 business owners had to learn from news sources that, despite their best efforts to comply with legal regulations, the centrally−approved new cash registers they ordered aren’t compatible with the expected parameters after all. The overseer of the implementation, the Hungarian Trade Licensing Office (MKEH) announced that it had revoked the licenses of already certified models at the end of January, saying the evaluation identified security flaws in the devices distributed by the two affected companies, Alt Cash and Japan Cash, without going into greater detail. “The identified illegal factor poses a serious threat to the goals determined by the government through introducing the online cash register system. Although there have been numerous orders submitted for the models in question, there were only a few dozen of them actually put into operation,” MKEH said in an attempt to reassure the public. This proved little consolation to the retailers, who have already paid a deposit on orders that the vendors now, in all likeliness, won’t be able to repay, since they have no products that are marketable in the wake of the ruling. Alt Cash, formerly the market ADVERTISEMENT

STORY leader HIGHLIGHTS for cash registers, now finds ■

Regulator revokes validity of 80,000 previously approved till contracts ■ Overall system roll-out set to suffer delays, endangers stores, tax revenues

itself without a product. The ministry’s special committee overseeing the implementation of the electronic registry system was summoned to an emergency meeting, which yielded little in results, apart from promising retailers who have already ordered machines from the newly disqualified product line that they will suffer no unfair losses and subsidies will still be available for a substitute device. EYES ON THE MONEY The controversial online cash register system took effect in January, burdened with a troubled run−up featuring repeated delays and other issues. Already, many businesses have closed down as a result of the new system and the costs presented by the new tills, while the government insists that there is nothing to worry about. The system is to link all points of retail to the tax authority’s servers, all but fully eliminating tax evasion in the process. The roll−out saw multiple delays, since businesses had difficulties navigating the system and acquiring the necessary equipment. The Economy Ministry blamed the delays on vendors who were unable to deliver the necessary solutions and technology on time and accordingly, refused to extend the introduction deadline. As a result, there are still many stores that have yet to get connected, aside from those affected by the over licensing changes of heart within the regulating bureaucracy. NAV promised these companies leniency for the time being, without going into specifics. “The goal is not to sanction. The Economy Ministry and NAV’s main task is to support the cash register installation and to help manufacturers

Photo: Zsolt Czeglédi/MTI

As if the delays endured thus far and the multiple hurdles placed in the arduous launch path of the electronic cash register system weren’t enough, the regulator threw yet another spanner in the cogs and terminated previously valid till orders for thousands of businesses. Even the government has admitted that there are many cracks in the system, while companies are, understandably, up in arms.

and other involved businesses implement the introduction as soon as possible,” the ministry told the Budapest Business Journal. SHAKEN SYSTEM It is unclear what the authorities’ approach will be, especially in light of the latest development, which some experts said could postpone the nationwide roll−out by months. In line with the leniency principle, auditors are active but mostly resort to warnings if they are satisfied that the retailer in question is taking adequate steps to meet the legal requirements. The ministry has a measly HUF 4.5 million in total penalties on record between November and January. The ministry’s responses arrived before the announcement of the surprise withdrawal of the 80,000 cash register

licenses (all for various Samsung models), meaning the rules of inspection that were already hanging in the air have become even more vague. In light of the latest bombshell, if predictions of further lengthy delays prove accurate, the government may even have to revise its economic projections, since the required VAT amounts won’t be coming in. The ministry remains optimistic, noting that the closure and launch of businesses is a natural phenomenon in the economy and isn’t directly linked to the e−till regime. It cited 2,333 business closures on record in the first three weeks of January compared to 4,590 in 2013. It is also confident that even with the abundance of hang−ups, the system will lead to an increase in the volume of centrally collected taxes, making the effort a worthwhile venture.

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Budapest Business Journal | Jan 31 – Feb 13

BBJ Research Markets in numbers

ALL QUIET ON THE TAX ADVISORY FRONT? STORY HIGHLIGHTSis widely regarded as well. Innovation

With competition remaining fierce, tax consultancies are eager to provide tailor−made services for their clients more than ever before. The tax authority’s zeal in bombarding a growing number of taxpayers with checks guarantees the further existence of such needs.

■

Tax ﬁrms don’t expect tax law changes on an extraordinary scale this year. ■ The number of clients seeking assistance due to tax authority checks has been growing consistently.

Since the effects of the crisis are far from over, consultancy−related spending has gone down in the economy. On the other hand, taxes are marked in dark red in the liabilities column, which, in turn, fuels demand for professional services offering tax optimization options. “The previous year delivered nice results for PwC Hungary. There were several changes that enabled us to

another key component of any growth strategy. At RSM DTM Hungary Zrt, focusing on this helped the company receive the ‘Tax Firm of the Year 2014’ award, CEO Zsolt Kalocsai explained. Ammo for future growth is provided in heavy loads by the tax authority’s activity. Lőcsei described a common phenomenon: “We are helping a growing number of taxpayers not only in the phase of the procedure before the authority, but also the court; and we make inquiries at the European Court of Justice ever more frequently.” In this connection,

Number of employees at the top three Hungarian−owned tax consultants in the past ﬁve years 2010

2011

2012

2013

100

Saldo

2009

2010

2011

2012

2013

1500

LEVENTE HÖRÖMPÖLI-TÓTH

2009

Total net revenues of the top three Hungarian−owned tax consultants in the past ﬁve years (HUF mln)

RSM DTM

serve our clients more efficiently and at a more reasonable price, for instance in the area of preparing tax returns,” Dr Tamás Lőcsei, partner and service line leader at PwC Hungary told the Budapest Business Journal. AMMO IN HEAVY LOADS Other market players further underline that rosy picture. WTS Klient Kft grew by around 20%, while Saldo Zrt saw steady interest for their expertise too. The tax advisory call service of Saldo was popular and demand was strong for its personal consulting as

WTS KLIENT

János Tancz, director of sales and marketing at Saldo Zrt stressed that the significance of specific needs is becoming critical. “Among such individual requests, company structuring and tax optimization can be highlighted, but cloud−based accounting solutions are also gaining ground, where the tax advisor does not merely provide accounting outsourcing service, but designs the service together with the software and the administrative procedures for the customer,” Kalocsai added.

1125

750

375

Saldo

RSM DTM

A PLAN FOR EVERY SCENARIO Keeping clients happy with different special wishes in mind pushes the market towards the strengthening of quality providers. “It is taking place in the midst of a price war that makes the market players reinvent themselves continuously,” Zoltán Lambert, a partner at WTS Klient Kft, said. As to the current calendar year, in spite of bad experiences of legislation that is retroactively effective, and the upcoming parliamentary elections, no major changes are expected on the law making front. “However, it cannot be ruled out that a shift in the global economic climate or the necessity to keep the budget deficit under control could trigger measures during the year,” Kalocsai added. Leitner & Leitner, a tax consultancy, hit an even more cautious note. “We would not like to make a prediction, but we are preparing a blueprint for every scenario. We are also ready if, as a result of substantial changes, a huge number of businesses would suddenly need a new tax plan.”

The BBJ Research column reviews a given industry, gives a market round−up and analyzes the numbers behind the market tendencies. Our analysis is based on the latest edition of the Book of Lists. For the latest, updated figures, check out DigiBOL, the digital version of the Book of Lists. www.digibol.hu

WTS KLIENT

The top three fully Hungarian−owned tax consulting companies listed had net revenue of

HUF 1,482 mln from tax consulting in 2013 This is a

1% increase from a year before

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Budapest Business Journal | Jan 31 – Feb 13

BOOSTED TAX TAKE PROVES NO MIRACLE CURE The government has introduced a series of steps to increase the treasury’s tax revenues that are making life more difficult for tax evaders, but are also weighing heavily on legally operating participants of the economy and holding back competitiveness with regional peers. GERGŐ RÁCZ

When Viktor Orbán won the elections in 2010, one of his initial drives was to increase legal employment alongside increasing budget revenues through more effective control of widespread tax fraud

STORY HIGHLIGHTS had been audited during the preceding ■

Government measures continue to increase central tax revenues ■ Measures, environment still contribute to muted economic growth in regional comparison

three years. The average international response is 75%. The authorities have good reason to monitor and inspect, given the extent of fraud and various other tax−related misdemeanors that can, on occasion, rack up quite a tab. Most recently, a crime ring was exposed in Győr that committed fraud amounting to HUF 7.5 billion through unpaid value added tax. The latest annual tally from NAV shows a total of HUF 121 bln in investigated white−collar criminal

Focus of tax audits between 2010 and 2013 (%)

Corporate taxes

that stems from the consequences of the Lehman Brothers crisis, heavily compounded by the taxes introduced by the Fidesz government. He notes that Hungary had a cumulative GDP growth of 1.7% between 2009 and 2013, which is a feeble amount compared to Poland’s 12%, Slovakia’s 10.5%, or Bulgaria’s 3.5%, and is even below the EU average of 2.4%. The muted growth originates from a balance sheet drop at Hungarian banks of 22 percentage points from 2009, compared to a 17 point increase in Poland, 20 points in Bulgaria and the overall EU drop of 3 points, Zsiday found. His observations are underlined by the repeated comments of the Hungarian Banking Association, which has complained for years about the excessive degree of taxes that restrict the lending that could fuel growth. The latest measure, mandating two free cash withdrawals from ATMs, will alone cost the sector HUF 40 bln, the association’s secretary general Levente Kovács said. In turn, the measure will further increase overall banking costs for clients. ADVERTISEMENT

Wealth taxes VAT Personal income taxes International taxes Customs and excise taxes Other 0

Source: Deloitte

that is recognized as an everyday element of doing business in Hungary. Statistics show there have been actual results on that front. Of countries in the Central European region, Hungary is one of the most reliant on tax revenues, according to the latest 2013 edition of an international tax survey published by the Organization for Economic Cooperation and Development (OECD). In 2012, the country had a tax to GDP ratio of nearly 39%, compared to 37.4% in Slovenia, 35.5% in Czech Republic, and 28.5% in Slovakia. This thirst for tax revenues has prompted several revisions to the structure throughout its current term and there are more ahead, targeted at increasing central revenues from taxes, whether it’s new levies or increasing stringency to avoid dodging existing forms. KEEPING CLOSE WATCH This is also reflected in the operation of the tax and customs authority NAV. A Deloitte survey published late 2013 found that 95% of the companies asked said they

offences in 2012, most commonly tax fraud. NAV currently has HUF 2.1 trillion in tax arrears on record. This is of course only a fraction of the amounts estimated to be circulating in the semi−legal and illegal economies, estimates that range from astronomical through preposterous to the astronomically preposterous. The latest scandal involving alleged widespread VAT fraud on foodstuff is claimed to amount to HUF 1 trillion alone, well above 3% of the country’s GDP. DOUBLE-EDGED SWORD The government’s efforts to increase budget revenues have yielded results, but have also had unfavorable consequences in terms of the country’s overall competitiveness when compared to its regional peers. This appears to be all the more true regarding sectoral taxes that are levied on the finance sector. A review from November by Viktor Zsiday of the Plotinus investment agency directly links Hungary’s muted growth to the absence of lending in the country

WWW.BBJ.HU

Budapest Business Journal | Jan 31 â€“ Feb 13

WWW.BBJ.HU

www.colling.hu

BALANCE KFT 11

www.balancekft.hu

ADĂ“REFORM KFT

CCA ZRT

Âť

www.adoreform.hu

Âť

www.cca.hu

DELOITTE NR MAGYARORSZĂ G[2] www.deloitte.hu

ERNST & YOUNG NR ADVISORY LTD[1] www.ey.com/hu

FAIRCONTO ZRT www.fairconto.hu

KPMG HUNGARY KFT NR www.kpmg.hu

134 128

100 108

157

Âť

128

Âť

10,806 â€“

Âť

10,400 11,200

Âť

146 â€“

Âť

Âť Âť

1992

Âť

1990

Eni Hungaria Zrt, Ăšjpesti EgĂŠszsĂŠgĂźgyi SzolgĂĄltatĂł 1RQSURĂ€W .IW 'pO EXGDL EgĂŠszsĂŠgĂźgyi SzolgĂĄlat .|]KDV]Q~ 1RQSURĂ€W .IW -lJHU 6]ROJiOWDWy pV .HUHVNHGHOPL .IW -lJHU 7UDQVSRUW 6SHGLWLRQ .IW )ĹƒYiURVL %L]WRQViJL ,URGD .IW

â€“

HR-CONSULTING

FINANCIAL CONSULTING

PAYROLL ACCOUNTING

ACCOUNTING

AUDITING

NO. OF FULL-TIME EMPLOYEES ON JANUARY 1, 2014

YEAR ESTABLISHED

MAIN CLIENTS IN 2013

SERVICES

â€“

PROPERTY CONSULTING

COLLING ACCOUNTING & 10 CONSULTING KFT

TOTAL NET REVENUE IN 2012 (HUF MLN) IN 2013 (HUF MLN)

NET REVENUE FROM TAX CONSULTING IN 2013 (HUF MLN)

RANK

COMPANY WEBSITE

OTHER

OWNERSHIP (%) HUNGARIAN NONHUNGARIAN

TOP LOCAL EXECUTIVE CFO MARKETING DIRECTOR

ADDRESS PHONE FAX EMAIL

â€“

Transfer pricing consulting, cafeteria consulting, cafeteria system operation

Individuals (100) â€“

Andrea Butkovics â€“ â€“

1138 Budapest, VĂĄci Ăşt 141. (1) 452-6900 (1) 452-6910 RIĂ€FH#FROOLQJ KX

â€“

-y]VHI 'HQFVL $WWLOD 'HQFVL (10), 7LERU 'HQFVL

â€“

JĂłzsef Dencsi, Tibor Dencsi â€“ â€“

1119 Budapest, FehĂŠrvĂĄri Ăşt 44. (1) 209-6448 (1) 209-6448/103 balance@balancekft.hu

Individuals (100) â€“

JĂłzsef SĂĄndor, JĂłzsefnĂŠ SĂĄndor â€“ â€“

'XQDKDUDV]WL )Ĺƒ ~W (30) 210-3641, (24) 470-301 â€“ maria.sandor@adoreform.hu

LĂĄszlĂł Hirsch (Âť), IstvĂĄn SzebellĂŠdi (Âť) â€“

LĂĄszlĂł Hirsch â€“ â€“

1148 Budapest, Fogarasi Ăşt 58. (1) 222-6819 (1) 223-4130 nimrod@t-online.hu

GĂĄbor Gion Gerard Lucey .LQJD 7LKDQ\L

1068 Budapest, 'y]VD *\|UJ\ ~W & (1) 428-6800 (1) 428-6801 deloitteinhungary@ deloittece.com

â€“ Ernst & Young &HQWHU &OXVWHU Limited (100)

IstvĂĄn Havas &VDED +RUYiWK Ă gnes Pellion

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

Âť

Âť Âť

IrĂŠn Csiza, Zsolt Ruszin, Veronika Antal RuszinnĂŠ â€“ â€“

1097 Budapest, .|Q\YHV .iOPiQ NUW 12â€“14. (1) 238-8023 (1) 399-1588 fairconto@fairconto.hu

Âť

.30* +XQJiULD .IW

.30* +XQJDU\ Holdings Ltd (1)

Robert StĂśllinger :LOOLDP &XUOH\ MiklĂłs Scheibelhoffer

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

Tax and business consulting, management consulting, transaction consulting

â€“ 3Z& &((

Nick KĂłs, 7DPiV /ĹƒFVHL TamĂĄs PĂĄl BorbĂĄla Palotai

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

1998

Âť

â€“

Âť

Business administration

1992

Âť

Legal advice, organization development, liquidation

Business consulting, enterprise risk management, legal services

Transaction advisory, business advisory, tax advisory

1990

1989

2008

1989

Âť

456

445

Âť

PWC MAGYARORSZĂ G[1] www.pwc.hu NR

Âť

Budapest Business Journal | Jan 31 â€“ Feb 13

â€“ 13,712

1989

Âť

572

â€“

Âť

NOTES: (1) 'DWD RI EXVLQHVV \HDU -XO\ -XQH (2) $PRQJ +XQJDULDQ VXEVLGLDUHV RQO\ 'HORLWWH =UW RIIHUV WD[ FRQVXOWLQJ

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

This list was compiled from responses to questionnaires received by January, 2014 and publicly available data. To the best of the Budapest Business Journalâ€™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, MadĂĄch Imre Ăşt 13â€“14., or faxed to (1) 398-0345. The research department can be contacted at research@bbj.hu

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Budapest Business Journal | Jan 31 – Feb 13

BRUSSELS AMBIGUOUS ABOUT REVERSE-CHARGE VAT According to last December’s news, the Brussels declined Hungary’s request for a rapid introduction of reverse−charge VAT in the sugar production sector. The measure would have been helped in the struggle to counter VAT fraud. How can Brussels’ negative decision be explained? The Budapest Business Journal asked Gábor Farkas, PwC Hungary’s tax services manager. ANDRÁS ZSÁMBOKI

In government circles, reverse−charge VAT is considered to be the major remedy for VAT abuse. If that is so, why have most states not switched to that system yet? A: Gábor Farkas: In order to answer that question, the notion itself has to be clarified. One has to explain how normal and reverse−charge VAT works. After the manufacturing of a product, the providers/suppliers form a kind of chain: in the case of normal, direct VAT payment, each provider calculates, reports, and pays their VAT to the National Revenue Bureau (NAV) and then files a VAT return. In the case of direct VAT payment, the state can enjoy continuous cash flow revenue from each participant in the chain of providers. Although from time−to− ADVERTISEMENT

are concerned, the biggest gain is the knowledge gained about the sector freshly switched into reverse−charge VAT. After switching, it becomes clear what levels VAT fraud reached earlier in that sector. Criminal groups, on the other hand, are easier to catch red− handed when they are in the process of establishing their new network in the newly chosen vertical market.

STORY HIGHLIGHTS ■

Corporate compliance can prevent and address corruption and other violations ■ Effective compliance requires full endorsement from the management all the way down consumption

time in the process the state has to pay money back, in the meantime it can use that money. In the case of reverse−charge VAT, the state loses this cash−flow opportunity. To put it differently, it is worth a state switching to the reverse− charge VAT system only if the loss of revenue generated by VAT abuse exceeds the gain stemming from the cash−flow effect.

That makes it easier to understand why Hungary requested derogation only for certain sectors, namely the construction industry, and, in the case of goods, for sugar and wheat. Dropping out of the entire cash flow effect would have been too great of a loss. A: A reverse charge restricted to certain sectors is not at all a perfect solution from the point of view of decriminalization. In the case of the direct VAT system, it is possible to construct a chain of providers in such a way that a party in the chain may repeatedly evade its VAT payment duties, thus accumulates a significant amount of VAT debt, and then in the end disappears. This method led to the so called ‘carousel fraud’ cases. This requires a long process of preparation on the side of criminal groups, because it takes a long time to found and register those companies that provide the false contracts and receipts. When

only one product is switched from direct into reverse−charge, criminals only lose time by having to build up another network of fraudulent companies in another vertical market.

Then does the state actually not win anything by opting for reverse charge? A: Well, the main winners are always the prudent companies of those sectors from which reverse−charge expels VAT abusers. As far as the tax authorities

So reverse−charge VAT ranks high among the possible weapons against VAT fraud. However, the EU has not approved Hungary’s request for a quick reaction mechanism (QRM) introducing reverse−charge VAT in the sugar industry. A: Brussels’ behavior concerning reverse charge is, at least, controversial. On the one hand, it seems to understand member states’ instant measures to cleanse those sectors of their economies that are the most affected by VAT fraud. No country should wait until the end of the long derogation process concerning reverse−charge VAT – that is why the legal institution of QRM was introduced in July last year. On the other hand, Brussels clearly states that member states should eliminate VAT fraud in the sectors and in those countries where it crops up. The best way to achieve that is to make national states interested in persecuting VAT abusers with all possible means, and not to fulfill reverse−charge VAT derogation requests. As a matter of fact, QRM has not ever been applied since it went into effect. The fact that Hungary’s application for reverse− charge VAT derogation has been declined has a very negative message for prudent firms: namely that it is not worth seeking a way out of the VAT fraud problem in Brussels’ direction.

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Budapest Business Journal | Jan 31 – Feb 13

NO CHOICE BUT LETTING IT ROLL Still facing a shrinking market, international payroll providers must overcome a double obstacle. They need to meet regional standardization demands and comply with the customized requests of their clients. Fast changing legislation is another demon to fight. LEVENTE HÖRÖMPÖLI-TÓTH

Payroll services have not been left untouched by globalization. Providing customers with a single point of contact and standard reporting in multi−country operations quickly formed a corporate fan base. Outsourcing payroll in the CEE region came as a godsend for multinational companies since it offers a one−gate−system with the necessary local legal and language knowledge. Outsourcing may not be a cure− all in terms of legal responsibilities, but international payroll can make a difference in easing the administrative pain for businesses with cross−border activities. RUSH CAN BE HARSH “Hungarian payroll is not outstandingly complicated compared to other CEE

STORY HIGHLIGHTS ■

International payroll relies on e-solutions to the largest possible extent, but paper-based administration is still a burden ■ Trends indicate a shift towards a wider need and use of self-service options

countries. However, a lot of documents on both the input and output side are still paper−based due to legislative restrictions,” András Szalai, managing partner of Process Solutions Kft told the Budapest Business Journal. The inconvenience stemming from the lack of e−administration means that the software environment as foreseen at a corporate group level needs to be harmonized with locally implementable solutions. The hardest thing for the service providers and software developers is to keep on top of sudden legislative changes, in particular those in the field of labor law, which requires more administration resources, Balázs Z. Nagy, business development manager at UCMS Group Hungary Kft said. Frequent changes make updating system configurations necessary, thus generating extra costs on the part of providers. But why bother at all to hire a specialist company? “The buzz word here is ‘pricing’. For firms with 1−100 on the payroll it costs a

lot less to outsource the service than employ a full−time specialist,” Péter Jerkovich, a financial controller, explained on behalf of specialist recruitment company Hays Hungary. “The software, which is very expensive, is another decisive factor.” SCANNING THE LANDSCAPE FOR SAVIORS Szalai stressed the importance of responding flexibly and sharing the system and the process with the client as well. “Customers are seeking increasingly process−based solutions and the implementation of their employee care approach. The employee helpdesk can be part

of this approach, when the employees can discuss their payroll related questions directly from the provider’s payroll team,” Z. Nagy said. “Training for the client’s employees is also a popular HR administration activity, because the service provider has the right industry knowledge to prepare the most relevant training package for the client. From multi−country project point of view the key is still the standardization while understanding the needs and proposing ways for further optimization.” Such an attitude is music to the ears of decision makers scanning the landscape for providers capable of satisfying their ever more complex wishes.

EXPERT OPINION

LOCALIZED PAYROLL MANAGEMENT COMPETENCE IN INTERNATIONAL ENVIRONMENT, OR OUTSOURCED PAYROLL MANAGEMENT? A corporation has two options to choose from when it comes to sustainable payroll management competence. Either to keep the task within the organization by ensuring continuous resources for it, or to outsource it to a payroll service provider – in this latter case, the cost is calculable and transparent. NEXON, Hungary’s market leading HR management services provider, has surveyed its nearly 300 outsource clients to find out why they decided to outsource their payroll and HR management processes, and how they would define quality service.

mployee satisfaction plays a vital part in a company’s success. Several studies about motivation have covered this topic, but it goes without saying that the most determining factor in satisfaction is the quality of wages and fringe benefits. What is meant by the quality of wages is not only the volume but also the predictability, accuracy, and transparency of wages. Maintaining quality in the current fastchanging and unique legal environment in Hungary calls for serious payroll management competence. When asked about the reasons for outsourcing, the majority of NEXON’s partners said that payroll and HR administration processes – such as payroll calculation, working time management, creating work schedules and keeping compliant with the relevant regulations – are not among the main competences of a company, therefore this area receives the least possible resources. By outsourcing processes, companies are able to focus on their core activity. According to Zoltán Lovas,

director of the services department of NEXON, several companies opted for outsourcing because this enabled their HR capacities to better support the companies’ strategic HR activities – which is an increasingly relevant expectation in a corporation’s life. It is also an important argument for outsourcing that a calculable cost element looks ‘better’ in a cost-conscious company’s books than costs spent on non-core activities (i.e. on human resources). Several partners of NEXON said they chose outsourcing in order to cut back on the HR costs of background activities. According to outsource partners of NEXON, the most important factors, when it comes to payroll and HR administration processes, are as follows: • Accurate, reliable payroll calculation • Full compliance with relevant Hungarian laws • Confidential management of wage and personal data • Integration into corporate HR processes

Zoltán Lovas DIRECTOR OF SERVICES DEPARTMENT, NEXON • IT security • Client-centered service • Cost-effectiveness NEXON has created and developed its outsource services based on the above mentioned standards, and has also developed its own IT solutions that support payroll and HR administration. Packages offered by NEXON do not only provide up-to-date payroll competence to its outsource clients, but also ensure complex payroll and HR solutions that fit IT systems and support the company’s everyday operation. Employee selfservice applications available along with the outsourcing service allow employees to get increasingly involved in HR processes; as a result, the efficiency of administrative tasks improves and the business role of HR also increases. An expert in market trends and the constantly changing legal environment, NEXON ensures reliable background support for decision making, thanks to its 25 years of experience in the field of HR processes, and the expertise of its 300 employees.

NOTE: ALL ARTICLES MARKED E XPERT OPINIONS ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILIT Y

WHY HAVE YOU DECIDED ON OUTSOURCING, AND WHY WITH NEXON? Csaba Tóth, HR director, LEGO Manufacturing: “We are a manufacturing company and focus our knowledge and skills on producing world-class products. We do not aim to deal with payroll management and being up-todate in legal changes. For these, we have NEXON as the perfect partner, because they are real professionals, therefore we can be sure that our payroll issues are in safe hands.”

www.nexon.hu

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Budapest Business Journal | Jan 31 – Feb 13

BBJ Research Markets in numbers

CATCHING THE PERFECT WAVE Accounting is not the only sector where predictability is yearned for, but 2014 is an election year in Hungary, which certainly does not help the cause.

STORY HIGHLIGHTS ■

The accounting sector is expecting major new tax legislation at the end of the year ■ Providers capable of adapting best to clients’ needs have a wild card to prevail

Total net revenues of the top ﬁve accounting ﬁrms listed (between 2009 and 2013; HUF mln)

2009

2010

2011

Process Solutions

UCMS Group

TMF

2012

2013

LEVENTE HÖRÖMPÖLI-TÓTH

The competition for clients on the accounting market has only intensified in recent times. With few new customers on the horizon, many in the field consider holding onto existing market share an achievement. “Success continued to stem from our ability to convince our current clientele that we can provide them with the best service possibly available,” Zoltán Lambert, managing partner at WTS Klient Kft told the Budapest Business Journal. The UCMS Group projects that the competition between financial and accounting outsourcing providers will be just as heavy in 2014 as in recent years. One bright area is that the acceptance of outsourcing as such shows a positive tendency.

HUF 7,629 mln

net revenue from accounting of ﬁrms listed in 2013 This is a

2% increase from a year before

BRACING THEMSELVES Real redemption on the market is still not in sight, though. It is not only fragile economic growth that militates against being overly optimistic, though. Longed−for predictability is also of short supply, which has triggered certain mechanisms. “Companies strive to set up their operation in a way that they are protected to the maximum level against unforeseeable and sudden political and market developments. Accordingly, foreign investors seem to have found the appropriate methods to achieve predictability,” Júlia Varga, managing director of TMF Hungary Kft said. The uncertainty related to this year’s parliamentary elections is expected to strengthen such self− protective reactions. Firms the BBJ spoke to expect substantial changes in legislation from the next government by the end of the year. Balázs Z. Nagy, business development manager at UCMS Group Hungary Kft said UCMS’s main task will be to interpret and transfer information on those new laws to their clients. Such an environment requires a quick reaction time. “Competition in the next couple of years will be determined by the ability of providers to adapt to the expectations of their customers,” Lambert noted. But since costs play an increasingly important role, added value is also sought for. “Risk management has gained critical importance as well,” Varga added in this regard. TIME TO GET FLEXIBLE That resonates with what András Szalai, managing partner of Process Solutions Kft noted: “Although the market is headed towards standard and automated solutions, clients always need customized services.” Indeed, such needs are becoming complex, with creative IT−solutions, flexibility and an end−to−end approach are of key significance. And there is one more factor that could determine a winning course. “Clients request that the provider should function as an entity effectively preparing the ground for decision− making. Apart from accounting duties, it is expected that firms carry out tasks related to professional reporting, information provision and to proceed as a consultant simultaneously,” Z. Nagy said.

3000

2250

1500

750

WTS KLIENT

RSM DTM

Number of employees at the top five accounting firms in the past five years

2009

2010

2011

2012

Process Solutions

UCMS Group

TMF

WTS KLIENT

2013

250

187,5

125

62,5

RSM DTM

WWW.BBJ.HU

Budapest Business Journal | Jan 31 â€“ Feb 13

STATISTICS ARRANGED Smartly designed payroll software supports business goals and reduces administration. ZSĂ“FIA VĂ‰GH

Dozens of unfilled wage sheets, handâˆ’held calculators and distressed accountants would best describe the endâˆ’ofâˆ’month/quarter/ year rush when payroll processing was still paperâˆ’based. Accountants had to calculate and fill in thousand of cells by hand until the Hungarian Tax Authority made electronic payroll processing mandatory, and a few clicks replaced all that effort. Todayâ€™s computerized payroll processing is almost hassleâˆ’free for a wellâˆ’educated professional. Programs calculate everything; accountants only have to enter days off and sick leave, salary details, or personal data when someone is hired. The new generation of payroll procedure software has even more to it. It is designed to contribute to smart business decisions, explains MĂĄrton SzĂźcsy, trade director of Nexon, a Hungarianâˆ’owned software maker and service provider in human resources management and payroll process. Statistics alone are hardly a help, they must be compiled in such a way that, say, a manager

can decide whether or not set up a new assembly line or see how much the workersâ€™ wages will cost if the establishment is built. From a developerâ€™s viewpoint, designing payroll software is not particularly challenging. One element that requires real expertise is to comply with the constantly changing regulations. Experts first need to study any new legislation and then adjust the software accordingly. This is trickiest part. You need a team that understands regulations completely and can transfer this knowledge in the software so it will be straightforward and easyâˆ’toâˆ’use, says SzĂźcsy. All this has to be done very precisely: legislation changes are take place very often and quickly in Hungary, more than 20 times a year.

The general business model most firms in the market use is a combination of officeâˆ’ software development and services: you buy the package, install it, and use it, benefitting from updates, service tools, etc. Online payâˆ’ perâˆ’use systems, when users subscribe only to the functions and services they need are not yet present in the country. Erika HorvĂĄth, product developer at KulcsSoft Nyrt, a business management and accounting software maker, says the company has never been asked to create such a system, but it does tailor its software to clientsâ€™ need, if requested. Recently, a company wanted a KulcsSoft attendance sheet to allow workers to clock in without having to register the time. The firmâ€™s developers added a â€˜NOWâ€™ button

to the software; click it and it automatically registers the time when pushed. Generally, these unique solutions are later integrated into the whole software range. Though curtailed by legislation, several functions of payroll systems can now be used on mobile devices. Employees just cross the days on a sheet they open on their mobile phone, and their boss can see on his or her phone when workers intend to go on holiday or how they arrange work shifts. During a meeting, a manager can see on his or her phone how many people showed up that morning, and how many were absent. These kinds of statistics are usually available the day after at best, says SzĂźcsy. Watching new trends in HR and optimizing software to them is part of Nexonâ€™s success strategy. For example during a meeting, a manager can see on his or her phone how many people showed up that morning, and how many were absent. These kinds of statistics are usually available later than the situation needs it, says SzĂźcsy. KulcsSoft also cites keeping up with the latest developments as essential, and refers to a good driveâˆ’toâˆ’value ratio as a draw to clients. Innovation may by hard to spot in the software but rather than eyeâˆ’catching platforms it is smooth operation that is most needed.

FAST ADAPTION OF REGULATIONS IN A PAYROLL SOFTWARE GRANTS COMPETITIVE ADVANTAGE

Partner for success ACCOUNTING / TAX ADVISORY / PAYROLL SERVICES

WHC Ltd., one of the largest economical and HR consulting companies in the region of Western Hungary and VT-SOFT Software Ltd., one of the leading HR management software vendors of Hungary started their cooperation 10 years ago. By using the Payroll and Social Security solutions, the Working Time Planner, Attendance Register and Cafeteria modules of VT-SOFT, WHC is providing high-level payroll and HR services for more than 60 companies with nearly 8,000 employees both in the Hungarian and foreign markets.

professional expertise IFRS

tax advisory

CFTU PQUJPOT XJUIJO UIF UBY MFHJTMBUJPO TFOTF PG SFTQPOTJCJMJUZ

payroll services

TFOTF PG SFTQPOTJCJMJUZ

security

tax advisory innovation

experienced consultants

NBOBHFNFOU

PO TJUF BDDPVOUJOH innovation quality payroll consultancy innovation on-site CFTU PQUJPOT XJUIJO UIF UBY MFHJTMBUJPO professional expertise

PĂŠter Berta, CEO of WHC explains their decision regarding the long-term cooperation: â€žThe most important factors â€“ in addition to the basic expectations towards legal compliance â€“ were customizability, speed, user-friendly interface of the software and also the integration possibility with the web based, attendance register module, which is a unique solution in the market. As these kinds of software platforms need constant support and updates due to the changing legislation, the secure background and extensive experience of the vendor also played a big role in the decision making process.â€?

CFTU PQUJPOT XJUIJO UIF UBY MFHJTMBUJPO

PĂŠter BERTA, CEO of WHC

In connection with human management market trends, PĂŠter Berta highlighted innovation and increasingly sophisticated customization options. He believes that the more innovative and customizable a system is, the more it supports the productivity of HR processes, even in continuously changing legislation environments. TamĂĄs Wehring, CEO of VT-SOFT. added: â€œDue to results of many yearsâ€™ development work, our software portfolio is able to excellently support the daily tasks of payroll and social security specialists and easily and ďŹ‚exibly can be adapted to the changing local and international legal regulations. As a reaction to customer needs we developed a unique solution in cooperation with WHC that enabled the software â€“ ďŹ rst in the market â€“ to implement payroll accounting period registry (time bank system) according to the new Labour Code. None of our competitors could offer this functionality as fast as we did, and none of any competitors of WHC was able to provide this service, which was deďŹ nitely a strong competitive advantage for them. We are very proud of their success and happy to contribute.â€? VT-SOFT www.whc.hu

OBUJPOBM BOE JOUFSOBUJPOBM BDDPVOUJOH TUBOEBSET

creative solutions IFRS creative solutions BCJMJUZ BOE USVTU NBOBHFNFOU consultancy IFRS TFOTF PG SFTQPOTJCJMJUZpayroll services innovation

â€œEase of use, Excel compatibility and custom reporting tools are the most obvious advantages in the solutions of VT-SOFT. After the implementation, we were able to connect the processes of our clients with the payroll processes through the integrated platforms, helping us increase the efficiency and security of our operations.â€?

TamĂĄs WEHRING â€“ CEO of VT-Soft

IFRS

vtsoft.unit4.hu

CFTU PQUJPOT XJUIJO UIF UBY MFHJTMBUJPO

OBUJPOBM BOE JOUFSOBUJPOBM BDDPVOUJOH TUBOEBSET

professional expertise quality innovation innovation

payroll services

CFTU PQUJPOT XJUIJO UIF UBY MFHJTMBUJPO

tax advisory innovation

BDDPVOUJOH

OBUJPOBM BOE JOUFSOBUJPOBM BDDPVOUJOH TUBOEBSET

on-site payroll innovation experienced consultants

BCJMJUZ BOE USVTU IFRS

TFOTF PG SFTQPOTJCJMJUZ

security consultancy payroll services

on-site payroll

professional expertise

CFTU PQUJPOT XJUIJO UIF UBY MFHJTMBUJPO TFOTF PG SFTQPOTJCJMJUZ

consultancy

professional expertise

OBUJPOBM BOE JOUFSOBUJPOBM BDDPVOUJOH TUBOEBSET creative solutions NBOBHFNFOU

FOUJSF TQFDUSVN PG BDDPVOUJOH TFSWJDFT

innovation IFRS BCJMJUZ BOE USVTU

security innovation

CFTU PQUJPOT XJUIJO UIF UBY MFHJTMBUJPO

(ZĹŹS 4[PNCBUIFMZ 5BUBCĂ…OZB ;BMBFHFST[FH XXX XID IV

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Budapest Business Journal | Jan 31 â€“ Feb 13

Accountig firms

â€“

415

1,452 1,526

â€“

WizzAir, British Telecom, General Motors, Valad Group, Sumitomo, Ibiden

230 1999

JĂĄnos Babos (50), Process Solutions International Kft (50) â€“

JĂĄnos Babos, Andrew Majlath, AndrĂĄs Szalai â€“ â€“

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

â€“

Hays, Maersk, BlackBerry, Sanyo

87 1995

â€“ UCMS Group EMEA Ltd (100)

BĂŠla Kakuk Katalin BĂşzĂĄs BalĂĄzs Z. Nagy

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

Management and domiciliation services

Âť

65 1995

â€“ TMF Group (100)

JĂşlia Varga, Zsuzsanna TĂĄborszki CselovszkinĂŠ â€“ â€“

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

Âť

46 1989

(100) â€“

PĂŠter Hajnal â€“ â€“

1103 Budapest, KĂ´ĂŠrt utca 2/A (1) 235-3010 (1) 266-6438 RIĂ€FH#EGR KX

Âť

43 1998

Individuals (100) â€“

*\|UJ\ .ĹƒU|VL Eszter Balogh RĂŠka KertĂŠsz ViktĂłria Szendrei

1143 Budapest, StefĂĄnia Ăşt 101â€“103. (1) 887-3700 (1) 887-3799 klient@klient.hu

Individuals (100) â€“

Zsolt Kalocsai KlĂĄra Vaitz Edina VĂĄradi

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

Individuals (3) Mazars S.A (97)

Philippe Bruno Michalak â€“ â€“

1074 Budapest, RĂĄkĂłczi Ăşt 70â€“72. (1) 429-3010 (1) 235-0481 mazars@mazars.hu

OTHER

â€“

OWNERSHIP (%) HUNGARIAN NON-HUNGARIAN

DUE DILLIGENCE

â€“

M&A

520

1,148 1,140

â€“

AUDITING

620

620 620

TAX CONSULTING

760

1,931 2,100

MANAGEMENT CONSULTING

775

1,183 1,189

PAYROLL ACCOUNTING

836

1,429 1,541

FINANCIAL CONSULTING

1,985

MAIN CLIENTS IN 2013

NO. OF FULL-TIME EMPLOYEES ON JANUARY 1, 2014 YEAR ESTABLISHED

www.ps-bpo.com

2,360 2,425

ACCOUNTING

PROCESS SOLUTIONS KFT

TOTAL NET REVENUE IN 2012 (HUF MLN) IN 2013 (HUF MLN)

COMPANY WEBSITE

SERVICES

NET REVENUE FROM ACCOUNTING IN 2013 (HUF MLN)

RANK

Ranked by net revenue from accounting

UCMS GROUP HUNGARY KFT 2

www.ucmsgroup.hu

â€“

TOP LOCAL EXECUTIVE CFO MARKETING DIRECTOR

ADDRESS PHONE FAX EMAIL

TMF MAGYARORSZĂ G KFT www.tmf-group.com 3

â€“

BDO HUNGARY (ACCOUNTING, PAYROLL AND OUTSOURCING) 4

www.bdo.hu

Âť Âť Âť Âť Âť

WTS KLIENT KFT www.klient.hu 4

RSM DTM HUNGARY ADĂ“TANĂ CSADĂ“ Ă‰S PĂ‰NZĂœGYI SZOLGĂ LTATĂ“ ZRT

â€“

IFRS, US GAAP

Âť

73 2001

â€“

Âť

110 1991

www.rsmdtm.hu

0$=$56 .g1<96=$.e57Ĺ‚ Ă‰S TANĂ CSADĂ“I KFT www.mazars.hu

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Budapest Business Journal | Jan 31 â€“ Feb 13

BBJ

4 Socialite PEOPLE ON THE MOVE

BOOK REVIEW

Scaling up excellence

KPMG / ASSOCIATE DIRECTOR, CORPORATE FINANCE TEAM

RESTAURANT REVIEW

Trattoria Pomo D’oro

MIKLÓS ANDRÁSI

Embracing a design−conscious mindset is not something ﬁrms can postpone and spend on only once we are out of recession. Rather, it is part of the route out.

➜ PAGES 28-29

Photo: Design Terminal

PROMOTING THE CREATIVE INDUSTRY

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DESIGN-CONSCIUOS PRODUCTS TO LIFT THE HUNGARIAN ECONOMY Design Terminal, an NGO set up to boost the Hungarian creative industry, became a budgetary institute this January. With the changes comes a longer name – Design Terminal National Centre for Creative Industries – and an overall budget of HUF 1 billion for 2014, plus a seven−year plan to help well qualified and talented creative experts tap their business potential and attract capital. DT’s former strategic director, Gergely Böszörményi− Nagy, has been promoted to general director, and talked to us about new strategies and plans. ZSÓFIA VÉGH

What changes will this transition bring about? A: Instead of continuously applying for funds to finance our projects, from now on we can calculate with a secure state support. It will allow us to plan ahead – further than just one year. All of this has come precisely at the right moment: Design Terminal’s new, long−term strategy is now adjusted to the EU’s 2014−2020 budgetary period, a policy frame in which creative industries has emerged as a strategic priority for the European Commission. The reason why both Budapest and Brussels find promoting the creative industries ever more important is that this field is able to address challenges typical in the European labor market. Among these are the manufacturing jobs’ traditional exposure to outsourcing, SMEs’ vulnerability, and youth unemployment. Unlike jobs in low value−added industries,

STORY HIGHLIGHTS where the single most important factor of ■

Embracing a design-conscious mindset is not something ﬁrms can postpone and spend on only once we are out of recession. ■ Rather, it is part of the route out. expansion

employment is labor costs, creative jobs are easier to retain with the right policy incentives. Also, a highly skilled creative workforce provides a competitive edge for the country that is steady, as opposed to cost of labor.

How can the creative industries solve the problem of outsourcing? Manufacturing has long been outsourced to developing countries. These nations are also getting more involved in design. A: It isn’t necessarily about deploying designers for multinational companies. What is more important is to match traditional SMEs and local designers. Involving designers in the development processes taking place at SMEs not only gives them a job but also makes their products more competitive. Design− conscious products can strengthen the national economy and make it more attractive. Competing against cheap knockdowns with well−designed, thoughtful, design−conscious goods is Europe’s one breakthrough.

SMEs today hardly invest in design: they are far more preoccupied with the economic problems they are currently facing. How can Design Terminal help in this? A: Embracing a design−conscious mindset is not something firms can postpone or spend on only once we are out of recession. It is part of the way out; Design Terminal is currently launching a new directorate for investor relations: a unit to help venture capitalists willing and able to invest in creative enterprises so they can take it up a notch and create a portfolio for an SME. Our directorate will select and mentor the most promising and marketable newcomer entrepreneurs to prepare for the market. Design Terminal will also provide ad hoc strategic, communications and legal support for those already practicing and about to enter the market. Mentoring means a long−term contact on a daily basis; it is not confined to preparation for trade shows and events. While some public bodies will ensure a presence at foreign fairs, we will focus more on the quality of that appearance. The number of businesses that can participate in international fairs without risks and have the capacity to serve a real commission is currently not more than ten. The field where we can help them the most is PR – to achieve proper press

coverage and expert feedback on the spot. Foreign press and PR are the areas these firms hardly have time or money left to manage. An ongoing cooperation with certain markets and trade fairs will also allow us to bargain for better terms for Hungarian business to appear later.

So even enterprises with more modest production and capacities might participate in the mentor program next year or afterwards?

A: With a good strategy and well−defined goals, definitely yes.

The pool of potential businesses is large. How will Design Terminal decide whom to mentor? A: We are working together with HR firms and communication agencies specialized in design on the final criteria. Experts all agree that it is the human factor that has to be measured prior to making an investment, so

BACKGROUND Gergely Böszörményi-Nagy is a communications professional with an MA in International Relations from the Corvinus University of Budapest. For years, he worked as a strategist for political, corporate and non-profit campaigns in Budapest and in Washington, D.C. He was a founding associate of Nézőpont Intézet, a Hungarian think-tank, and then served as Deputy Head of Strategy at the Department of Government Communications. Since summer 2012, he has been with Design Terminal, first as strategic director, now as general director. As head of the state agency, he is responsible for enhancing the role of creative industries in the Hungarian economy.

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our focus will be that. The program is scheduled to start in the fall with three−to−five firms per half a year as a maximum. We don’t want to manage too many, as that will be to the detriment of quality. As for VCs, any firm can subscribe to monitoring. However, we wish to work together in person and not reduce it to a newsletter service.

Will you not fall into the trap of supporting businesses that already operate well, leaving out those more in need? A: Our aim is to support those with a potential to become strong businesses. The already strong will not apply to this program.

How do will you measure a project’s impact on the economy, the overall aim being to boost the Hungarian economy? A: This spring, Design Terminal will have a team of economists prepare the first−ever horizontal study of the Hungarian creative industry: its state and value added to the economy. In the future, it will help us check figures and the industry’s hopefully growing impact on GDP. However, on a daily basis it is success stories that prove our effectiveness: creative enterprises that, I hope, will be visible in the coming years.

BACKGROUND Originally a bus terminal built in 1949 in the Bauhaus style, the Design Terminal building was first set to become a design hub in 2003. Then Prime Minister Péter Medggyessy aimed to establish the institute from EU funds. The building was to open in 2006, but delays in renovation and lack of occupancy permits prolonged the process. In the meantime, the revamped building started to decay. In 2009, representatives of the design industry called for action but only after the 2010 elections did Design Terminal open. It now belongs to the Administration and Justice Ministry, and has housed several design and innovation-related projects focusing on homegrown and regional talents. Of major recognition is ‘Gombold újra’ (‘Re-Button it’), a contest aimed at allowing young fashion designers in Hungary and the CEE to introduce their work. Innovation forums, international design exhibitions and Christmas fairs are among the major events Design Terminal has organized and supported. Beyond running its own talent projects from 3D printing to fashion industry contests, Design Terminal’s downtown HQ is a home to major events of the Budapest start-up community as well.

„

Discovery consists of seeing what everyone

has seen and thinking what nobody has thought. Szent-Györgyi Albert, (1893 - 1986), Biochemist & Nobel Prize Winner for Medicine in 1937

„

4th Annual Pharmaceutical Manufacturing Congress for Enlarged Europe

26-27 February 2014 Budapest, Hungary www.pharmconnect.eu the events group

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BOOK REVIEW

SCALING UP FARTHER, FASTER, AND MORE EFFECTIVELY How do you create a great organization? By scaling up excellence. Scaling up excellence is the key to creating a great organization. It’s how a small enterprise expands without losing focus. It’s how a brilliant new idea or plan developed by the few goes on to be adopted by the many. And, in hard times and tough situations, it’s how pockets of smart new thinking overcome cultures of indifference or negativity. An organization that doesn’t know how to scale up its best features won’t achieve long−term success. Bestselling author Robert Sutton and his Stanford colleague Huggy Rao have devoted nearly a decade to uncovering what it takes to create and spread outstanding performance. In ‘Scaling Up Excellence’ they share the fruits of their research, tackling a challenge that determines every organization’s success: scaling up farther, faster, and more effectively as a program or business creates a larger footprint. Drawing on inside accounts, case studies and academic research from a wealth of industries – including start−ups, pharmaceuticals, airlines, retail, financial services, high− tech, education, non−profits, government and healthcare – they provide crucial insights into corporate cultures, both good and bad, and offer a road map for establishing and stimulating excellence. In the process, they demonstrate how to use ‘premortems’ when making big decisions about change. They reveal why seven is so often the

magic number when it comes to team size. They examine successful and unsuccessful quests for improvement, show how to eliminate destructive beliefs and behaviors, and discuss when a single corporate mindset is best and when local variation is preferable. “Scaling excellence requires the kind of grit required to run a marathon rather than a sprint,” Sutton and Rao write. “If anything, this analogy understates the challenge. Scaling is akin to running a long race where you don’t know the right path, often what seems like the right path turns out to be the wrong one, and you don’t know how long the race will last, where or how it will end, or where the finish line is located. Yet it is one of the fundamental challenges that every organization faces, whether it’s small or large, new or old, or somewhere in between. And the good news is that plenty of people and teams find ways to master this mess, take satisfaction in their daily accomplishments, and take pride in spreading constructive beliefs and behaviors far and wide.” ‘Scaling Up Excellence’ is the first management book devoted to what is – or should be – a core priority for every organization. It’s an essential read for every leader. SCALING UP EXCELLENCE by Robert I. Sutton and Hayagreeva Rao Published by Random House Business Books ISBN 9781847940995 Available to order through www.hungaropress.hu

RESTAURANT REVIEW

THE SECRET INGREDIENT IS: PASSION Trattoria Pomo D’oro, one of the first authentic Italian restaurants in Budapest, first opened its doors in October 2002. Since then the dream of the owner Gianni Annoni, the well− known TV−presenter in Hungary has come true: Pomo D’oro has become one of Budapest’s favorite Italian restaurants. The first thing you notice when you enter the place that it is full of people having a great time. Although you can hear almost all the languages of the Tower of Babel, most of the guests are expats or residents. The interior of the spacious, rustic style ‘trattoria’, located in the 5th district in Arany János utca, is well designed. Apart of the well proportioned outer room there is another large one with a huge glass wall, which allows you to watch the cooks working in the kitchen, and there is a separated function room too, equipped with fireplace. It seems to be a nice hideaway for private events or for business meals. We started our dinner with two favorites: burrata cheese bundle with sun−dried tomatoes, and two faced beef carpaccio. The burrata, a fresh, mozzarella like cheese originating in southern Italy, was extremely rich and creamy. It was a real treat, especially with the fresh leaves of the

salad and the sun−dried cherry tomatoes. The two faced carpaccio is a combination of the original recipe created by Giuseppe Cipriani in the 1950s with marinated,

For the main course we ordered fish, charcoal grilled branzino – it arrives fresh every day – with potato mash, and creamy spinach. The fish was great, tasty

paper−thin slices of beautifully marbled beef sirloin, and the now popular version with ruccola, cherry tomatoes and shaved parmesan cheese. We tried a glass of an excellent white wine from northeastern Italy, a tiny little village called Custoza, and some homemade Altamura bread.

and light, perfectly prepared. Instead of sophisticated spices or sauces it was only seasoned with some delicate extra virgin olive oil – less is more; the essence of Italian cuisine had been proved again. We also chose a main course from the daily offers: rabbit ragout with white wine,

sundried tomatoes, black olives and sage served with homemade pasta. The ragout – we were told that only eight to ten portions of the daily offers are made, so we were lucky to get one – was a bit salty because of the sundried tomatoes and the olives, but with the dry red wine named Sprugnolo – specially suggested to try with the rabbit – it found a perfect harmony. The dessert selection was so tempting and rich that we agreed to try a bit of all. This way we could taste profiteroles with white and brown chocolate sauce, topped with salty hazelnut brittle, a lemon tart Sorrento style and mille feuille with vanilla cream and amarena sour cherry. They are all amazing! The lemon tart is light and aromatic, the sweet profiteroles are well balanced with the salty hazelnut topping, and the mille feuille is creamy and exotic with the amarena cherries. We finished our dinner with a glass of Tokai dessert wine (which had the well− known aszu taste, but was not too sweet), and as a surprise, a cup of bourbon vanilla and tangerine sorbet. We were full and happy. We’ve agreed to return soon accompanied with friends, and share with them the experience of tasting a piece of Italy in the heart of Budapest. RATATOUILLE

TRATTORIA POMO D’ORO 1051 Budapest, Arany János u. 9. 36 1 302 6473

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WHO'S NEWS

Name MIKLÓS ANDRÁSI Current company/position KPMG / ASSOCIATE DIRECTOR, CORPORATE FINANCE TEAM

Name SZABOLCS VARGA Current company/position BANK GUTMANN / PARTNER

In January 2014, Andrási joined KPMG’s corporate finance team as associate director. He has gained extensive leadership experiences in various sectors over the past 20 years. Earlier in his career he was deputy CEO at ÁPV Zrt and MVM Zrt. From 2009-10 he was president and CEO at MÁV Zrt. After that he was responsible for managing EU energy tenders as the CEO of Energiaközpont Nonprofit Kft. At KPMG he oversees advisory projects covering finance and transactional issues in the M&A department.

Varga, head of the Bank Gutmann subsidiary in Budapest, was made a partner of the bank, as the first manager from outside the bank’s head office in Vienna. He began his career as a capital market analyst and subsequently worked as asset manager for the Procent investment firm and the Austrian bank Samesch & Cie. He granted from Corvinus University and the IESE Business School and joined Bank Gutmann in 2004.

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

Name ILDIKÓ RÉZMŰVES Current company/position DVM GROUP / MARKETING AND PR DIRECTOR

Name KARL FAHRNBERGER Current company/position BANK GUTMANN / CO-OWNER

DVM group has appointed Rézműves as marketing and PR director. She previously fulfilled a similar position as communication and marketing specialist of international real estate developer Skanska Property Hungary. She is dedicated to providing both group level and project specific marketing, PR and communication support to DVM group. She has earned her M.A. in journalism, and her Ph.D. in communication and media studies at the University of Colorado, Boulder, USA.

Fahrnberger has been made coowner of the bank. He started his career with Gutmann in 1994, after having worked for Creditanstalt and Schoellerbank. Having been responsible for security settlement, fund accounting and payment transactions, Fahrnberger became head of the operations department in 2006. Due to the increased demands of the job he has led the 47-strong operations team together with Jörg Strasser since September 2013.

Name ZSUZSANNA BENYÓ

Benyó was appointed as strategic director of Extreme Net in January. Previously she spent 13 years with communications agency Grayling, where she held various senior local and international positions. As strategic director, she will be responsible for business development and efficient integration, as well as for organization development.

Current company/position EXTREME NET / STRATEGIC DIRECTOR

Name STEPHAN WASMAYER Current company/position BANK GUTMANN / CO-OWNER

Wasmayer has also been made a co-owner of Bank Gutmann. He came to Gutmann in 1997 as a working student and has spent most of his career with the bank. In 2004 the Viennese-born manager and graduate of WU Vienna University of Economics and Business became the head of risk management at Gutmann Kapitalanlageaktiengesellschaft. Since 2009 he has been responsible for asset management within the KAG’s management board.