Budapest Business Journal 2602

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BUSINESS JOURNAL BUDAPEST

VOL. 26. NUMBER 2

JANUARY 26 – FEBRUARY 8, 2018

SPECIAL REPORT

Taxation and Accountancy

NEWS

Hungarian Elections: Campaign to be Fierce

As Hungary prepares for a general election, all opinion polls point to a record-breaking third successive victory for Viktor Orbán’s Fidesz-KDNP coalition.

But the political battle could get yet more acrimonious, say analysts.  5

BUSINESS

Budapest Airport Hotel Opens

Wing has opened the first hotel to be based at Ferenc Liszt International Airport, aimed at tourists, business travelers and staff employed at industries connected to the airport.  6

SOCIALITE

Rod Stewart and Living the Expat Life

David Holzer tries to decide whether wanting to see Sir Rod Stewart at the Budapest Arena on January 29 says something about a need to reconnect with his Englishness.  21

The Choice: Help SMEs or Attract FDI

RE IAL C E P S

T POR

The government lowered social security contributions to 19.5% from January 1.

Some want further cuts to aid SMEs, but tax expert Péter Honyek argues they cannot be afforded, and the corporate tax cut of 2017 does far more to attract FDI. 13

2 | 1 News BBJ

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Budapest Business Journal | January 26 – February 8, 2018

THE EDITOR SAYS

EDITOR-IN-CHIEF: Robin Marshall EDITORIAL STAFF: Sonja Bencze, Zsófia Czifra,

Kester Eddy, David Holzer, Levente Hörömpöli-Tóth, Christian Keszthelyi, Gary J. Morrell, Rob Smyth, Ágnes Vinkovits.

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VISEGRAD GROUP CONTINUES TO DISPROVE DOUBTERS For an institution that has at times been derided by outsiders as irrelevant, and which has seen variable levels of interest from its own members over the years, the Visegrad Group (the accent on the “a” of Visegrád is dropped on the official English language website) seems to be going through something of a revival lately.

Also known as the V4, the group is comprised of Hungary, Czech Republic, Slovakia and Poland. Its year-long rotating presidency is, for the fifth time, being held by Hungary, which remains in the role until the end of June. Perhaps that explains some of the current fanfare around the organization. Whatever else the Fidesz-led government might be accused of, it knows how to make the most from international hosting duties.

In theory, at least, the origins of the organization can be dated back to the Congress of Visegrád in 1335, when Charles I of Hungary, Casimir III of Poland, and John of Bohemia, met to iron out some local disagreements. It is, of course, a nonsense to suggest any kind of continuity between then and now. The 27th anniversary of the modern incarnation will come fairly soon, for it was founded on February 15, 1991; it was initially known as the Visegrad Triangle until the separation of what was Czechoslovakia in 1993.

The coming together of the three, then four countries made sense, both to improve internal relations, and to promote their common goal of Euro-Atlantic integration. Some suggested the V4 would become an irrelevance once its members achieved European Union membership, but history has proved differently.

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Partly that comes down to size. While Poland will become the fifth biggest member state in the EU once the United Kingdom completes Brexit in March 2019, the other three have no such economic weight. But there are also shared experiences dating from their membership of the Warsaw Pact. Slovakia has consistently been the most obviously pro-EU (Prime Minister Robert Fico said in October of last year, in response to the Czech elections, “[….] I am glad that Slovakia has become a proEuropean island in this region”), but the other three have taken on increasingly Euroskeptical tendencies, possibly driven by a shared suspicion of centralized super states.

Whatever the real reasons, there can be no doubt that there is strength in numbers, particularly given the imminent departure of Great Britain, the long-time leader of what might be termed the EU’s awkward squad.

There is increasing economic confidence, too. Hungary’s GDP growth of around 4% last year, might be looked on with envy by older, more established members of the Union, but it actually makes it something of a laggard in a regional context.

Hungarian Prime Minister Viktor Orbán and Minister of Foreign Affairs and Trade Péter Szijjártó have been engaged in one of those periodic Fidesz exercises in singing from the same song sheet in recent weeks, repeatedly referring to the fact that Germany now does more trade with the V4 than with France, creating a new EU axis driving the Union forward.

Most recently, there is the suggestion of a Visegrad development bank, the timeframe for establishing which is due to be discussed by the four PMs at a V4 summit in Budapest today (January 26). It is a lofty ambition, but exactly what role such a bank might play is a moot point. It is intended to support infrastructure developments, but Hungary, in particular, would have delivered very few such projects without EU money, and is tapping China for the upgrade of its rail links with Belgrade, complaining terms and conditions are more favorable than anything Brussels would offer.

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News

///macroscope

Brighter Prospects for Both Global and Local Economy Retail Trade Turnover in Hungary, 2016-November 2017.

Retail trade, billion forints at todayʼs prices.

January February March April May June July

ZSÓFIA CZIFRA

August

The International Monetary Fund recently released its latest economic forecast, stating that the activity of the global economy will continue to firm up in 2018.

As for 2017, the institution put global output at an estimated 3.7%, which is 0.1 percentage point faster than projected in the fall and 0.5 percentage point higher than in 2016. The pickup in growth has been broad based, with notable upside surprises in Europe and Asia, the IMF notes.

Global growth forecasts for 2018 and 2019 have been revised upward by 0.2 of a percentage point to 3.9%. The revision reflects increased global growth momentum and the expected impact of the recently approved U.S. tax policy changes, the IMF says.

However, the study notes that over the medium-term, a potential buildup of vulnerabilities if financial conditions remain easy, the possible adoption of inward-looking policies, and noneconomic factors all pose notable downside risks.

Stronger Than Expected

In emerging and developing Europe, where growth in 2017 is now estimated to have

exceeded

5%,

activity in 2018 and 2019 is projected to remain stronger than previously anticipated, lifted by a higher growth forecast for Poland and especially Turkey, the IMF forecast says. Although it does not mention Hungary specifically, outlooks have been revised and both the Hungarian government and most analysts now project GDP growth for 2018 of above 4%.

As for last year, both the Ministry for National Economy and the National Bank of Hungary (MNB) expect GDP growth of around 4% in 2017, according to statements made recently by representatives of the two institutions. Speaking at an economic

September

2016 2017

October November

644.5 699.5 654.6 687.9 756.2 811.6 783.7 830.8 787.3 854.3 813.7 872.0 848.4 901.3 854.8 922.1 826.2 897.9 852.6 925.4 842.6 925.4 1003.0

December

forum hosted in Vienna by the Euromoney financial magazine, Ágnes Hornung, minister of state for financial affairs at the economy ministry, said that GDP growth in 2017 may have reached 4.1%, which is likely to accelerate to 4.3% this year.

According to a forecast by the ministry, the state deficit is expected to be 2% of GDP, compared to the government forecast previously set at 2.4%. The lower deficit forecast is due to the six-year salary agreement signed between employers and employees, which has resulted in higher tax revenues.

The central bank also estimates greater GDP growth for 2017, putting it at around 4%. It says that the volume of investments was likely to have increased by more than 20% for 2017. According to the MNB, a high rate of investments is also expected for this year, while exports and household consumption are seen as fueling GDP growth. Inflation will stay at around 2% in the foreseeable future.

For the past year, consumer prices were up an annual 2.4% in 2017, the latest data released by the Central Statistical Office (KSH) reveals. Food prices rose by 3.5% and the price of tobacco and spirits jumped by 6.8% last year. Clothing prices were up 0.5%, but consumer durable prices were 0.4% lower.

Detailed Data

The detailed KSH data also shows that household energy prices increased by 1.6% during the course of 2017, the price

Source: KSH/MTVA Sajtóadatbank/MTI

The outlook for both the global and the Hungarian economy look good this year, with projections for the latter having been revised upwards again.

of goods in the category that includes vehicle fuel edged up 0.8%, with vehicle fuel prices up 0.5%. Service prices were up 1.1%. In the last month of the year, inflation was 2.1%, slowing from 2.5% in November. Inflation adjusted for a basket of goods and services used by pensioners

The Hungarian economy is still in good shape: the increasing domestic demand, the investment boom generated

by EU funds and the record high consumer confidence index all signal further growth. was 2.3% both in December and in the full year 2017. The MNB noted that volatile items, such as food and energy, and demand-sensitive products made a similar contribution to price rises in December.

ING Bank analyst Péter Virovácz told state news agency MTI that while inflationary pressure could grow, he expected inflation to remain below the central bank’s 3% target in 2018. He forecast an inflation rate of 2.7% for

2018. Dávid Németh of K&H Bank said inflation could slow down in the first quarter of the year, due to certain tax changes - such as the lowering of the VAT rate on fish and on internet services - but inflation may accelerate again after the second quarter, approaching 3% by the end of December. He projected inflation averaging 2.5% in 2018. Gergely Suppadn of Takarékbank put this year’s average inflation at 2.7%.

The Hungarian economy is still in good shape, Equilor said in a recent press release. The increasing domestic demand, the investment boom generated by EU funds and the record high consumer confidence index all signal further growth, Equilor analysts noted.

However, Equilor puts this year’s and next year’s growth a little lower than the government, at 3.5% and 3.3%, respectively. At the same time, it adds that these figures can be modified upwards depending on several internal and external factors during the year. It emphasizes that long-term outlook for the Hungarian economy greatly depends on the conditions of the European Union budget period starting

in

2021.

In the shorter-term, however, Equilor does not expect that the fiscal conditions will significantly ease this year in Hungary, despite the fact that 2018 is an election year.

4 | 1 News

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Budapest Business Journal | January 26 – February 8, 2018

Equality Before the Law? Hungary’s Homebirth Pioneer Internationally recognized homebirth expert Ágnes Geréb has finally, after her last appeal, been sentenced to twoyears imprisonment for three homebirth incidents, though some have argued that the outcomes would have been no different even if the births had been conducted at hospitals. The case, however, draws attention to structural healthcare problems, and raises questions about legal equality. ÁGNES VINKOVITS

Homebirths have only recently been regulated in Hungary. Previously, the state, and the healthcare system, tried to discourage them. homebirth center and had to be transferred to hospital when the baby encountered serious breathing difficulties.

The parents made no accusation against Geréb, as they did not believe the midwife was at fault. The hospital, however, had to report the case by law. After a few months in custody back then, Geréb has spent the past seven years under house arrest. Her case also takes in two other tragic incidents in 2003 and 2007; in only one case have the parents pressed charges.

To understand how an internationally admired professional with decades of experience and 3,500 healthy homebirths behind her could find herself in this situation, one has to recall how under regulated homebirth in Hungary was until relatively recently. Although there was no law preventing homebirth, those who performed it faced far more serious consequences than their colleagues at official institutions.

If a hospital is found guilty of malpractice, the institution is usually obliged to make financial amends but the responsibility of the doctor involved is rarely examined in a criminal procedure.

It appears that gynecologist and midwife Geréb will, finally, have to go to jail for two years, and not practice her profession for ten, as a result of two fatal homebirth incidents and a third with unexpected complications. The long-running case has divided much of Hungarian society Law as a Shield and prompted debate on homebirth.

The case against Geréb, an internationally “The rules of medical work at hospitals are laid down in labor regulations, which the doctors acknowledged homebirth expert, who was can use as a shield when asked about their acts also a pioneer of letting fathers into Hungarian in a problematic situation,” Zsombor Kovácsy, labor rooms, dates back to 2010, when a woman unexpectedly went into labor at Geréb’s an attorney specializing in healthcare, tells

the Budapest Business Journal. By contrast, as a result of the lack of a regulatory framework around homebirths, when any type of complication occurred, however minor, a police investigation was immediately started.

Following overwhelming media attention in Geréb’s case and the loud opinions expressed both in favor of and against homebirths, Parliament finally passed detailed regulations on the issue in 2011.

Hungarian law has since then allowed women to decide where they want to give birth, as long as the baby is not in danger and therefore in need of a hospital environment. The professional requirements of those who help baby deliveries were also laid down for the first time, while mothers have to declare in advance that if the leading birth assistant or pediatrician decides hospitalization becomes necessary, they will accept it without opposition.

The regulation could obviously have no effect on Geréb’s case, whose charges dated back to before the law was created.

Nonetheless, she has maintained in court that she was not violating professional protocols in any of the cases.

As she pointed out at her last appeal, when she lost a baby due to shoulder dystocia in 2007, altogether 132 Hungarian babies died at birth that year. Only one of these tragic incidents hit the headlines or resulted in a criminal law case; the one that Geréb was attending.

Geréb argued at court that tragedies happen sometimes without a single mistake made, and all cases should be measured on the same scale, as people are equal in the eyes of the law.

Prenatal care and delivery is a special field of the troubled Hungarian healthcare system. It is a decades-old open secret that many expectant mothers - regardless of salary level - chose semi-private care in the hope of better service.

While the state-financed “free” system suggests roughly three visits during a pregnancy, many mothers opt for a monthly private check-up to discuss the pregnancy with their doctor for about HUF 8,000-25,000 per visit.

However, apart from these meetings and a promise that the doctor will attend the delivery no matter whether on duty that day or not, no extras are included; everything follows standard procedures and uses the state infrastructure. All the examinations, as well as the delivery, are conducted at the hospital. If everything goes as planned, fresh parents express their gratitude towards the doctor by giving a gratuity that can be tenfold the price of a single visit.

Healthcare trade unions have recently threatened a pre-election strike in announcing their demand for a pay rise that also covers nurses, ambulance workers and maintenance workers, who, the unions say are not only forced to work long shifts but also have to take second and third jobs to be able to maintain their family. The situation of doctors is not much better either. In such an under-financed system, which is burdened by overwork on one side, and framed by vulnerability and expectations on the other, tensions are understandably high.

However, since only a few hundred mothers wish to deliver their children outside of hospitals, they pose no real threat to the unofficial pregnancy business. According to Geréb, the resistance to homebirth could be attributed to hospital professionals’ concerns about giving up their exclusive competence.

Despite the final appeal, the Geréb case might yet still run. Local and international midwife communities have called on the President of Hungary, János Áder, to offer clemency to Geréb (at the time of writing, the Amnesty For Agnes Gereb Facebook page has

582 likes

and 573 followers), while other supporters are organizing peaceful demonstrations on the streets.

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Hungarian Elections: Fidesz in Driving Seat, Campaign set to be Fierce As Hungary prepares for a general election, all opinion polls point to a recordbreaking third successive victory for Viktor Orbán’s Fidesz-KDNP coalition. But with the stakes and frustrations getting ever higher, the political battle – never less than bitter – could get yet more acrimonious, say analysts.

KESTER EDDY

Sunday, 8 April will see Hungarians vote for the eighth democratically elected government since the since the transition from communism

in

1990.

The overall result is almost a foregone conclusion, according to Ágoston Mráz, chief executive of Nézőpont, a Budapest political think tank close to Fidesz.

“In our latest, December, opinion poll, 64% of Hungarians predict that Mr. Orbán will win the next election and form the next government,” Mráz told foreign journalists earlier this month.

Moreover, the fractured opposition parties – most frantically jockeying for a place in some form of alliance – have thus far failed to outline either the make-up or program of any alternative government, he says.

As a result, “nobody really believes that there could be a change of government.

‘Nobody’ also means the leaders of the opposition, as well as a majority of Hungarians,” he said.

Reluctant Concurrence

Speaking at the same event, Csaba Tóth, director of the liberal Republikon Institute, largely – if reluctantly – concurred.

“I think the overall picture is clear: Fidesz is very likely to win the next elections [although] I think there is a

two-thirds “super majority” for the next Orbán government – he had little choice.

Full Picture

However, he argued the polls fail to capture the entire picture, with government success boosted by massive, one-sided campaigns in state-friendly media, all paid for by tax-payers’ money.

“Fidesz is very likely to win the next elections [although] I think there is a slight chance that they might lose the absolute majority, but it is difficult to see how much of that is wishful thinking on my part.”

Ágoston Mráz, Nézőpont. slight chance that they might lose the absolute majority,” he said, before adding, “it is difficult to see how much of that is wishful thinking on my part”.

The two disagreed, however, on the reasons behind the Fidesz ratings, and whether these will ultimately reflect the vote on polling day.

Artfully deflecting discussion away from the migration issue and Orbán’s controversial leadership role, Mráz emphasized Hungary’s economic

Complexities of Election System Make Accurate Forecasting ‘Very Difficult’ With Fidesz commanding 50-55% committed voter support in opinion polls, how will parliament’s 199 seats likely be divided up after April 8?

The answer – according to both Tóth and Mráz – is that the complex Hungarian election system contains so many uncertainties that no one can be sure.

Barring a political earthquake, Fidesz-KDNP will emerge as the largest political force, almost certainly keeping their absolute majority, i.e. more than 50% of seats.

Beyond that little is certain.

Voters with an address in Hungary can vote twice: once for their individual constituency (106 seats in total) and once for the ‘party list’ (93 seats).

One imponderable is the large number of Hungarians abroad – particularly those in neighboring countries who have recently acquired citizenship. The latter,

Csaba Tóth, Republikon Institute. growth, improved salary levels and the government drive to bring what it sees as “strategic” sectors under majority Magyar ownership.

Tóth made no effort to contest the poll data; given that his institute measured Fidesz support

at

57%

in December – a level that, if realized at the ballot box, would easily result in a

overwhelmingly pro-Fidesz in sentiment, may only vote for the national list as they lack a Hungarian residence.

More crucially, within Hungary the outcome will depend on opposition party cooperation.

“Corruption has always been an issue, but I think it’s going to be a bigger issue now. You have this overall feeling that the elite of this system is getting richer and richer, and that is causing a lot of frustration,” he said.

And with all parties set to get state support for their campaigns, voters will be exposed to a greater variety of political advertising.

“All the opposition will attack Fidesz, so you will see a different dynamic,” Tóth argued.

Moreover, the feeling is that a new Fidesz government with a two-thirds majority will further tighten the screw on opponents.

“If you perceive this to possibly be your last election, then you campaign differently,” he said: “You campaign harder.”

All this leaves Politics can be Different (LMP), the greenconservatives, as pivotal to the final outcome – even though it currently boasts just 5-6% support. In 2012, LMP eschewed cooperation with the left-liberal bloc, scraping into Parliament just above the threshold 5% share of votes.

Battle Alone Despite insisting that it will again fight alone in April, it is an “openJobbik, the former radical-right secret”, according to Tóth, that LMP turned national-populist party, boasts 15-16% approval ratings, but – is open to cooperation, at least in shunned by others – it is expected to some individual constituencies.

“I think it’s important that in 2014, battle alone. the left opposition won 10 seats The so-called “left-liberal” parties without any coordination with LMP. (comprising the Socialists, You will see more coordination [in Democratic Coalition (DK), Dialogue, April],” he says.

Momentum, Liberals and Together) Mráz agrees that with so many potentially form the largest variables, predictions are difficult. opposition grouping with some 28% “In our December poll, Fidesz was at of committed voter support.

51%, and we were not the highest.

But to turn this into seats, they My sentiment is that Fidesz will need to cooperate both in the 106 get similar to 2014, that is 44%,” individual constituencies and by he says, adding, “Fidesz would forming a joint party list. Thus far, then have a very strong mandate the Socialists have formed a full … whether 110 [seats] or more alliance with Dialogue, and have an than 133, a constitutional majority, agreement with the DK on individual would depend on the opposition districts, but not on party list performance.” candidates.

2

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Budapest Business Journal | January 26 – February 8, 2018

Business

Budapest Airport Hotel Opens

Wing has opened the first hotel to be based at Ferenc Liszt International Airport.

The ibis Styles Budapest Airport Hotel is aimed at tourists, business travelers and staff employed at industries connected to the airport.

GARY J. MORRELL

“By building the airport hotel we have not only created a new hotel, but carried out what is an important and much needed development project from the perspective of tourism in Hungary,” said Noah Steinberg, chairman & CEO of Wing at the opening.

The project is located on a site in front of Terminal 2, and is connected to it via a walkway. Wing as developers and owners of the 5,200 sqm project have handed over operation of the hotel to the ibis Styles

ten junior suites and eight suites. The complex provides a 135-seat restaurant and wine bar opening onto a terrace in summer. An event and conference center has the capacity for 250 people.

Enhanced Profile

The new hotel is seen as enhancing the profile of the airport and strengthening its competitiveness in the region.

Passenger numbers at the airport increased by 10% last year to

11

million

hotel chain, a member of the Accor group.

The operating rights for the project have been awarded on a 20-year contract.

“The hotel is an important gateway to Hungary for travelers arriving from abroad, and also influences their first impressions of the country. We took this into consideration when designing every element of the new facility,” added Steinberg. “The new hotel will provide one of the first impressions for foreigners arriving in Hungary. It has a key role for tourists and business travelers.”

The five-story building was constructed by Markett Építő and designed by László Szerdahelyi and József Pesti of Aspectus Architect Zrt., Wing’s in-house architects and interior designers. It offers 145 rooms

“The hotel is an important gateway to Hungary for travelers arriving from abroad, and also influences their first impressions of the country. We took this into consideration when designing every element of the new facility.” in a contemporary “travel” design style.

These consists of 127 standard rooms,

according to Budapest Airport, the operator, and annual passenger numbers are predicted to increase to 13 million.

Wing has invested HUF 3.2 billion (more than EUR 10 million) in the project, which was financed by the Hungarian stateowned EXIM bank. The building was delivered after a 16-month development period. János Gerő, deputy CEO for business development and transactions at Wing, describes the project as a “unique development opportunity”.

Wing is now active in the office, industrial, retail, hotel and residential market sectors. “Hotel in one respect is a more complex market sector, as hotel rooms need to be filled every day as compared to the office sector where leases are concluded on, for example, five-to-ten year leases,” commented Gerő.

The ibis Styles Budapest Airport Hotel is expected to attain full occupancy reflecting the high demand in the Budapest hotel market and specific demand for hotel space at the airport, according to Gergely Kolin, CEO for Accor economy hotels in Hungary.

Wing have permits for the development of a further phase of the hotel project on an adjacent site.

MCAP Global Finance Purchases Népliget Center transportation network,” commented MCAP Global Finance (UK) LLP, the London-based Klaus Schmid, director at MCAP Global Finance.

“As part of our business plan, subsidiary of the New York-based investment we aim to optimize the building and manager, Marathon Asset Management, acting have identified opportunities to further enhance our current and future highon behalf of its funds, has purchased the quality tenant occupation.”

28,000 sqm Népliget Center. It was advised by Value-add Marathon Asset Management was formed Lodge & Partners, which will oversee the local in asset management of the building.

GARY J. MORRELL

The Népliget Center, located adjacent to the Népliget metro station, includes tenants such as Ericsson, DHL, Philips and the Hungarian National Railway.

The earlier generation office center was developed by Skanska and subsequently acquired by GLL. The transaction reflects the growing attractiveness of the Budapest office market for foreign investors looking to

establish a presence in Central Europe, attracted by the favorable supply and demand fundamentals in the Hungarian capital. The market, with its large office pipeline, provides opportunities for the purchase of both new and older properties that provide value-add possibilities.

“Népliget Center, our first acquisition in Hungary and the CEE region, is an excellent asset with good property fundamentals including exceptional access to Budapest’s public

1998

and describes itself as an investor in emerging European real estate markets. Lodge & Partners Investment Management is a CEE based investment and asset manager that works on the acquisition, management and enhancement of commercial property. In CEE, it says it sees its role as value-add wherever possible.

The Népliget Center is located in District IX at the intersection of Könyves Kálmán körút and Üllői út, providing metro, tram and road access with a direct link to the airport.

Also in the area, Wing is due to deliver the Magyar Telekom Group headquarters this year, located adjacent to the Groupama Ferencváros Stadium. A decision on the development of a further phase of the project will be made later in the year. Skanska has also acquired a development site in the area, which is becoming an increasingly attractive office development location, reflecting the growing demand for offices with direct public transport links by tenants and property owners.

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Budapest Business Journal | January 26 – February 8, 2018

WHO’S NEWS

///

Partner Joins Amrop Kohlmann & Young

Do you know someone on the move?

Send information to news@bbj.hu

recently we’ve come to feel that it’s time to take ‘a big step’ and Nóra’s arrival has taken place at exactly the right time.”

alongside Bird & Bird’s existing head, Peter Knight. He has been consistently ranked and recognized as a leading lawyer by Chambers and Partners, Legal 500 and IFLR 1000. His clients fall predominantly into the Tech & Comms, Energy & Utilities, and Life Sciences & Healthcare sectors.

Bird & Bird Expands Budapest Office

Effective from the beginning of January, Nóra Ruszkai has joined leading international executive search firm Amrop Kohlmann & Young as a partner.

With more than 20 years of experience in senior management, coaching and training, Ruszkai lived for several years in the United States and China. In recent years, she has managed her own media sales company.

Ruszkai spent 11 years at Sanoma Media as the company’s COO. Before this, she worked in various leadership positions at Unilever, Levi Strauss and MultiChoice.

“For a long time, I have been interested in executive search,” explained Ruszkai.

“I think now is absolutely the best time for me to have met Amrop and its owners, since from every point of view I will be able to put my maximum into making Amrop Kohlmann & Young an even greater success.”

“We are very happy that Nóra has joined us,” said managing partner David Young.

“For many years we have been looking for a new partner with an extensive network and market orientation who could bring new momentum to our 25-year-old company.”

Richard Kohlmann, the company’s other managing partner, noted: “Amrop Kohlmann & Young is one of the leading executive search firms in Hungary.

Tradition is very important for us. But

International law firm Bird & Bird will welcome two partners, three senior counsels and a team of 15 lawyers to the firm’s Budapest office on February 1, providing a significant and strategic boost to the firm’s Hungarian offering.

Partners David Dederick and Konrád Siegler, together with their team from Weil, Gotshal & Manges, will be combining with the existing Bird & Bird team in Hungary to form a practice able to offer clients significantly broader and deeper advice than either of the two practices individually, according to a press release sent to the Budapest Business Journal.

The move comes as Weil, Gotshal & Manges announced it will close its Budapest office from February 1, although it says it will have ongoing cooperation with the new combined Bird & Bird team to assist global clients.

David Dederick has been practicing in Central and Eastern Europe for more than 25 years, specializing in cross-border M&A, private equity and real estate matters. The current managing partner of Weil, Gotshal & Manges’ Budapest office, Dederick joins Bird & Bird as co-head of Budapest,

Business

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and data protection matters, which will complement the new team’s market-leading expertise in corporate, commercial, dispute resolution, regulatory and finance work, with key clients in the energy, banking and finance, telecom and media sectors.

The combination will also create a strong presence in the sports sector and real estate market. This will enable Bird & Bird to offer a far broader range of services to its existing clients in Hungary, and in the wider Central and Eastern European region, the press release concludes.

SAS Hungary Welcomes Managing Director

Konrád Siegler has also been practicing for more than 25 years. He specializes in banking and finance and capital markets transactions, and also has considerable experience in M&A, privatization, bankruptcy and restructuring matters, and in general corporate and commercial law. He has represented Hungarian and international banks (as well as other borrowers) in numerous project finance and syndicated lending transactions. He has also advised on regulatory matters in connection with several bank sale, purchase and merger transactions. He is regularly ranked as one of Hungary’s leading banking and capital markets lawyers.

Joining Dederick and Siegler is a team of three senior counsels who are strongly recognized in the market: Pál Szabó and Ferenc Mátrai (both corporate) and László Nanyista (dispute resolution). They join Bird & Bird counsel Bálint Halász.

With a team of 15 additional lawyers joining (ten associates and five trainees), the new combined Bird & Bird team will total 29 lawyers, representing one of the most significant developments in the local legal market.

Since opening ten years ago, the Bird & Bird Budapest office has built up strong expertise in intellectual property, tech and communications, dispute resolution

Tibor Loncsár took over the position of managing director at SAS Hungary, the local office of the multinational developer of analytics software, on January 1 from Tibor Musza, who founded the office 25 years ago.

Under the supervision of Musza, SAS Hungary set up a customer base which includes the National Tax and Customs Administration (NAV), Central Statistical Office (KSH), OTP Bank, MKB Bank, Erste Bank and others.

Loncsár is a graduate of Budapest University of Technology and Economics and took courses at the University of Texas in Austin. He acquired management experience over more than 20 years, in various positions at Microsoft, Dubai eGovernment, oil and gas firm MOL, and telecom companies in Hungary, Canada and Switzerland.

In his spare time, Loncsár builds remote control cars with his 19-year-old son, which have won several European competitions.

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7-9 FEBRUARY 2018 HUNGEXPO HUNGARY INTERNATIONAL HORECA & RETAIL SHOW IN HUNGARY FURTHER INFORMATION:

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3

www.bbj.hu

Budapest Business Journal | January 26 – February 8, 2018

Special Report Taxation and accountancy

Changes Continue Trends, Simplify System Most of the tax changes introduced as of this year are in line with previous Hungarian taxation trends aimed at decreasing the burden on individuals and shifting the emphasis to consumption.

Still, the overall tax burden remains fairly high compared to regional peers.

SONJA BENCZE

As usual, January kicks off with some new tax regulations. Yet contrary to previous years, there are no drastic changes on the horizon. The previous trend of lowering the tax burden on employment related and income taxes continued last year, while the ratio of indirect taxes within the state income was increased. The biggest change might be the upcoming introduction of the online invoice reporting obligation.

“From July 2018, taxpayers will have to provide electronical information on the content of invoices including a charged VAT of at least HUF 100,000, issued by an invoicing program”, Daniel H. Nagy, senior tax advisor of MAZARS told the Budapest Business Journal.

Consequently, the invoicing program must ensure the electronic transmission of the invoice content to Nemzeti Adóés Vámhivatal (the National Tax and Customs Administration, or NAV). The program must be able to provide NAV with information on the invoices upon issuance, but not later than within 24 hours. This regulation will enter into force on July 1.

tax, and a new tax base deduction item was introduced in corporate income tax.

“With the above measures, the government intends to provide tools for employers to ease the pressure caused by the lack of workforce in certain

“Regarding corporate income tax, a favorable change is that the 10% minimum limit has been deleted from among the conditions of the ʼnotified shareʼ acquisitions.”

Another notable change is the increase of the minimum wage to HUF 138,000, and

to

HUF 180,500

for positions that require qualifications; this translates into an 8% increase compared to 2017. In parallel - as a form of compensation for the increased employment costs at employers - the social tax rate was decreased from 22% to 19.5 %. This, however, is not a novelty: the trend in lowering social security charges began last year, when the rate of social contribution payable by employers was reduced more sizably from 27% to 22%.

“To compensate for the loss to the national budget caused by the beneficial changes in income taxation, the state should focus more on effective tax collection, especially in the field of value added tax.”

“The additional reduction of employers’ tax and contribution burdens seems to be well justified,” Nagy noted. “Employers’ full wage costs are close to 160% of net wages in average in the Central and Eastern European region, due to the high payroll related taxes and contributions.”

The so-called tax-wedge, which reflects all the taxes and contributions to be born in relation to wages, still remains especially high in Hungary, the expert

said. Besides the social tax rate, the rate of the healthcare charge is changed to 19.5%.

SME’s subject to KIVA (small business tax) also see a favorable change: their tax rate is decreased to 13%.

Focus on Collection

“To compensate for the loss to the national budget caused by the beneficial changes in income taxation, the state should focus more on effective tax collection, especially in the field of value added tax,” Barbara Koncz, director of PwC’s tax advisory team told the BBJ. “Although the VAT gap is continuously decreasing due to anti-VAT fraud measures such as EKAER [the Electronic Trade and Transport Control System for goods transported by road] and online cashiers, there is still room for improvement.”

Nagy added: “The change of VAT rates could, in theory, impact the central budget.

However, the recent changes might not have a significant effect after all.” The items where the VAT-level was reduced this year such as the rate of internet access (reduced from 18% to 5%, the lowest in Europe) or fish for human consumption (down from 27% to 5%) - account for a small portion of the overall VAT-revenues. The VAT rate of restaurant services, reduced from 27% to 18% starting in January 2017, is further reduced to 5% from 2018. However, a tourism-development contribution

of

4%

was introduced from the same date.

In order to increase the mobility of employees, seen as essential in combating the labor shortage, the threshold of the tax-exempt subsidy for housing is increased in the frame of personal income

geographical locations. The administrative burden on employers is also eased since, from January 1, 2018, employers are no longer in charge of preparing tax returns for their employees. NAV is preparing a draft for all employees,” Koncz explained.

“Regarding corporate income tax, a favorable change is that the 10% minimum limit has been deleted from among the conditions of the ‘notified share’ acquisitions,” Nagy said. On the basis of the above, from January 1, the tax administration could be notified of acquisitions of any size of share (still within the 75-day deadline after which rights are forfeited).

Simplified System

Some new rules introduce simplifications: the seven regular audit procedures will be replaced by only two, the regular tax audit and the compliance audit. The regular audit will generate a closed taxation period, and the compliance audit will cover all other previous tax audit types (e.g. tax audits before refunding).

In order to avoid unnecessary appeals and to speed up collection, a new instrument, the conditional tax penalty, is introduced. The taxpayer should pay only 50% of the tax penalty assessed if it waives the right to appeal against the first instance resolution and pays the tax short fall in time. The conditional tax penalty and the benefit for “reliable” tax payers can be combined, which could further decrease the payable tax penalty to a maximum of 12.5%.

As of January 1, an objective deadline is applicable for tax audits. As a general rule, tax audits cannot be longer than

365 days

(the deadline is 180 days for “reliable” taxpayers).

“While this deadline definitely puts some pressure on the tax authority, it will be very beneficial for the tax payers as they can count on having the audit closed within the objective deadline,” Koncz said.

www.bbj.hu

3

Budapest Business Journal | January 26 – February 8, 2018

Special Report | 9

PROMOTION

Tax Revisions to Speed Up TMF Group named a ‘Major Legislation on tax revisions has been given a new structure, and changes that are meant to speed up the process. Yet, consulting an expert in good time will become more crucial than ever.

LEVENTE HÖRÖMPÖLI-TÓTH

Tax payers and the tax authority should be looking forward to cutting the time it takes to end overly lengthy revision procedures thanks to new legislation effective as from January 1. Actually, the entire regime of tax revision has been restructured. To start with, tax proceedings are now covered by three dedicated codes, which provide for the basic rights and obligations of tax payers as well as detailed rules on procedure and implementation.

However, Dr. Péter Juhász, senior tax lawyer at Híd Tax Consultancy Zrt. warns that it is not necessarily easier to get a clear overview of the regime as a result of the modifications. Certain issues are regulated in government decrees, for example. The only advantage of this is that legislative amendments are set to speed up, since adopting decrees takes a lot less time than passing a bill.

“What matters a lot more, though, is that a whole new approach should prevail

“Tax proceedings used to drag on for years, but now they must be finished within one year no matter what.” from now on that aims to cut the time span of tax revisions,” Juhász highlights.

For a start, the tax payers’ position will improve, in accordance with the declared mission of the government to make the tax authority more tax payer-friendly.

One Year Deadline

“Tax proceedings used to drag on for years, but now they must be finished within one year no matter what,” the expert says of one of the most important novelties. This implies that the National Tax and Customs Administration, or NAV, is obliged to make its case within that period, and if it fails to do so, the procedure ends.

Tax payers, in turn, will need to gear up for tighter rules on legal recourse. For one, a limitation period has entered into force with regard to making observations against the official minutes, which is to establish the facts as interpreted by the tax authority.

Similarly restrictive is an amendment

Contender’ by Everest Group in Finance and Accounting Outsourcing Assessment

Very high scope of accounting and tax services and a high level of customer satisfaction, with customised, localised client solutions.

TMF Group, a leading provider of global business services, is pleased to once again be named a ‘Major Contender’

by Everest Group in its latest PEAK Matrix™ market assessment.

Positioned against market success and delivery capability, TMF Group’s results include: • Very high scope: the scope of finance and accounting services provided across processes, industries, geographies and buyer sizes

Péter Juhász, Híd Tax Consultancy Zrt. according to which at the stage of appeal no new evidence can be invoked.

“Those subject to revision used to have the opportunity to refer to new facts at any point in the recourse phase just to delay proceedings. This practice ends now,” notes Juhász. “Therefore, contacting a tax expert right after the launch of a tax revision will become more crucial than ever in order to take note in due time of what facts may be relevant and what strategy can be drawn up on the basis of them.”

Clients often show up only when they have already received the official minutes, the expert tells the Budapest Business Journal. But if no observation is filed within the limitation period, the authority will go on to issue the decision of first instance.

“With that you enter the appeal phase, where you cannot refer to any exculpatory evidence that the client was aware of, but failed to submit in spite of the official warning, before the decision. And that deprives the client of key tools of defense,” Juhász cautions.

In addition, the scope of extraordinary legal recourse has also been limited. The new rules allow tax payers to file such a request only once and within one year at the latest after the decision became legally binding.

Tax proceedings that were ongoing as of January 1, 2018 are not covered by the new amendments; the new scope applies only to renewed procedures or cases launched after that date.

• High buyer satisfaction: The 2017 Assessment noted that TMF Group has presence in all major geographies and a ‘global-control-local-contact’ approach, to provide extremely customised and localised solutions.

Responsiveness and good attention to quality are some of the key strengths noted by clients.

Also regarded as strengths in the 2017 Assessment are TMF Group’s localised Enterprise Resource Planning (ERP) solutions, reporting and tax platforms to meet the changing demands of local regulatory conditions.

Allan Harness, Global Head of Product at TMF Group commented: “This year’s findings reflect our global presence and operating model that allows us to offer accounting and tax services in local language, with a truly local understanding of all our clients’ reporting obligations. We achieve this through a global governance model that provides TMF Group clients with transparency, efficient communication and control of their operations.

Harness continued: “Accounting and tax is a major focus area for TMF Group’s growth ambitions, and with this in mind

we have recently invested in Thomson Reuters OneSource software for the delivery of tax reporting.”

Katrina Menzigian, VP Research at Everest Group added: “What sets TMF Group apart is its unique “global-control local-contact” delivery model and wide global footprint, which empowers it to connect effectively with its clients and provide both customised and localised solutions. When combined with the firm’s breadth of coverage across the finance and accounting (F&A) lifecycle, TMF Group becomes an impactful partner for clients grappling with global F&A challenges.”

The 2017 Assessment classifies 25 FAO service providers. Everest Group uses its PEAK Matrix methodology to evaluate the providers’ market success and FAO delivery capability. Providers are positioned on the matrix in one of three categories – Leaders, Major Contenders and Aspirants.

This year, TMF Group was also recognised by Everest Group as a ‘Major Contender’ and ‘Star Performer’ in its Service Provider Landscape and Multi-Country Payroll Outsourcing (MCPO) PEAK Matrix™ Assessment 2017.

For further information, please contact: Carlie Bonavia, PR & Communications Executive: Carlie.Bonavia@tmf-group.com

www.tmf-group.com

10 | 3

Special Report

www.bbj.hu

Budapest Business Journal | January 26 – February 8, 2018

Taxation Market Talk: Grow and Adjust

Judit Jancsa-Pék, LeitnerLeitner.

Players in the tax advisory arena have been enjoying robust growth, but say they need to gear up to be able to adjust to ever changing customer needs.

LEVENTE HÖRÖMPÖLI-TÓTH

The Hungarian Central Statistical Office estimates Hungary’s GDP to have grown by 3.9% in 2017, which dynamism has clearly left a mark on pretty much every sector of the economy. The tax consulting segment was no exception as a market survey prepared by the Budapest Business Journal found.

In the experience of VGD Hungary, the markets have been driven by searching for new paths, which manifested itself in the increasing number of M&As and startup foundations, says tax partner Andrea Kuntner.

“The trend continued in 2017 with more appetite for investment, but all that optimism may be overshadowed soon by the growing labor shortage as well as way too steep wage raises,” she adds. Changes cause clients of accounting and tax consultancy firms to continuously migrate. That presents

not only more opportunities but it also requires a great deal of adjustment and efficiency in terms of human and technical resources.

Quick Changes

Judit Jancsa-Pék, partner at Leitner&Leitner confirms that financial advisory services have greatly benefited from the economic boom. However, she believes the Hungarian tax legislation still often sees quick changes, and that makes the role of competent consultants even more critical.

“Your service needs to be tailormade at all times, whether concerning assistance at preparation for the implementation of new rules or drawing the attention of clients to potential risks and ways to handle them,” she says.

The ever-intensive global battle against fraudulent business practices further poses a challenge for compliance.

This legal environment calls for tax advisors to guide clients on how to proceed when it comes to self-disclosure obligations, she says.

OrienTax is market leader in the independent tax advisory segment, with particular expertise in the fields of sports and film. It is little surprise, therefore, that partner Károly Radnai mentions the splendid performance of the latter as having helped his firm a lot.

“Last year was the best year ever for the Hungarian film industry. We have been in charge of dealing with tax matters related to productions originated in the U.K. and the U.S., which had a very positive impact on our business. In general, 2017 was a fantastic year, not only for the film business, but also in other areas,” he tells the BBJ. With ever more disruptive technologies available, consulting firms don’t have a choice but to keep the pace with global digital transformation.

According to Radnai, though, they

Károly Radnai, OrienTax. are in a business where human capital matters still more.

“Tax advisory, as opposed to tax compliance, is a high-added value service, and therefore it is much more difficult to rely on automation,” he notes.

Customer-friendly

VGD says it strives to ensure the most customer-friendly experience possible by using a number of IT solutions. Paperless book-keeping is the goal; invoices are received electronically, and bank details are recorded done by scanning. “Upon request, our clients can have personal access to data bases and reports concerning them,” Kuntner adds.

“The trend continued in 2017 with more appetite for investment, but all that optimism may be overshadowed soon by the growing labor shortage as well as way too steep wage raises.”

Another cutting-edge tool VGD makes use of is content marketing. “Our AdWords campaigns, promoting our transfer price documentation preparation service, turned out to be particularly successful in the past years,” Kuntner says as an example of the recent use of content marketing.

She says such activities help VGD boost its competitiveness, take part in different customer tenders with a higher success rate, and keep long-term clients thanks to elevated customer satisfaction.

Andrea Kuntner, VGD Hungary.

LeitnerLeitner, in turn, relies on its own thematic blog when it comes to making use of an online presence. It has been available for several years now and the potential audience has been significantly broadened thanks to the English and German-language versions.

“By having such a forum, we can reach a lot of visitors who may not necessarily be professionals,” Jancsa-Pék explains.

“This is our goal: to make company executives familiar with tax issues.”

The approach is not to get lost in highly complex technical details, but rather provide an easy-to-digest breakdown where risks and potential pitfalls are highlighted. “With this useful tool, we can assist our existing clients and reach out to new partners as well,” she says.

LeitnerLeitner keeps the use of social media in its business strategy between clearly defined limits, though. As Jancsa-Pék explains, the confidential nature of tax advisory services does not play well with the sort of online publicity embodied by internetbased community platforms. Therefore, they don’t use such channels to do any direct sales, either. Social media is therefore restricted to announcing positions on LinkedIn, or for getting the word out about corporate events in closed groups. OrienTax pretty much shares the same view.

VGD gives the impression of using social media more extensively. It aims to be active on Facebook and LinkedIn as well, Kuntner reports. “We use SM to create buzz about our professional engagements, namely whenever we attend an event or hold a speech, or an article of ours gets published,” Kuntner says. “But we also post material regarding the social life of the company, as we desire to show both our professional and our social competences to the young, among others.”

www.bbj.hu

3

Budapest Business Journal | January 26 – February 8, 2018

Special Report | 11

5% Restaurant VAT Rate to Boost Competitiveness The 5% VAT rate applied to certain segments of gastronomy from January will help retain talent and improve overall quality, market players say. Even the newly introduced tourism development contribution is seen as clearly positive by the industry.

LEVENTE HĂ–RĂ–MPĂ–LI-TĂ“TH

During the recession, VAT on restaurants was cut from 7% to 5% in France to boost demand. By contrast, in Hungary the standard 25% rate was increased to 27%, a world-record. But now Hungarian law makers have apparently embraced a major mind shift, not least thanks to the lobbying of the main players in the market. As a result, January 1, 2018 marked the introduction of a 5% VAT on the sector, albeit with certain restrictions.

The idea is to create an environment where Hungarian restaurants enjoy a level playing field compared to regional competitors. “We have reached the VAT level that is typically applied across the continent. You can’t work with machines in this industry, and staff is costly,â€? says ZoltĂĄn Hamvas, deputy chair of the Pannon Gastronomy Academy (PGA), which aims to raise Hungary to the global cuisine elite. Indeed, according to European Commission data, VAT is set at maximum of 10% in ten EU member states, and only Luxembourg applies a lower rate (3%) than Hungary.

Easing the tax burden is expected to trigger an industry-wide wage increase, a long overdue measure.

For the sector in Hungary is characterized by salaries that are

25-30% lower

than the national average. Not surprisingly, the Western regions and Balaton have experienced a chronic labor shortage lately, a phenomenon that is becoming the norm all over the country. “It is in the very best interest of owners to raise wages from the extra funds that remain in their pocket due to the tax cut.

Those who don’t will have a hard time to find qualified personnel,� explains Hamvas under whose leadership Hungary successfully applied to host the European final of Bocuse D’Or, the most prestigious chefs’ contest in the world. “Investments to improve comfort or kitchen technology can now become a reality as well.�

Hamvas is very pleased about the tax reform, in spite of the fact that from January restaurants will be obliged to pay a newly introduced tourism development contribution, which adds another 4% to the liabilities column.

Contribution An Opportunity “This is not a burden, but an opportunity,� he notes. “Any industry would be more than happy if their VAT rate went down from 27% to 9%. On the other hand, the

tourism development contribution will be spent on country marketing, from which the entire sector is bound to benefit.�

Besides, there is a justifiable argument behind the fact that canteens have remained in the standard VAT bracket of 27%. “It is no accident that segments such as canteens or catering were left out of the scope of the reduced tax rate since, in those cases, the number of customers can be calculated in advance,� adds Hamvas.

It is more problematic that the 5% rate can be applied only to meals consumed on the spot and in-house made non-alcoholic beverages, he says.

Business daily VilĂĄggazdasĂĄg has reported, though, that it seems there is a fair chance to standardize the current gastronomy VAT mix by law, so that take-away food and bottled soda should end up with the same 5% rate early in this parliamentary term.

Many complain that VAT is only the tip of the iceberg, though, and cutting the social security contributions payable by the employer is what is really needed to improve the profitability of the industry.

Hamvas, however, dismisses such criticism. “We cannot be insatiable; the VAT story is already a great success. Our industry has been treated as a partner by the government and the Hungarian Tourism Agency, for which we are very thankful. I am sure social security contributions will be decreased once the state of the economy allows it to happen,� he concludes.

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12 | 3

Special Report

www.bbj.hu

Budapest Business Journal | January 26 – February 8, 2018

Simplified Employment: Cutting Back on Black Work Simplified employment is being made increasingly attractive for employers in a concerted bid to reduce black work, long a problem in Hungary. Will the authorities or the markets – under pressure from the labor shortage – finally be able to solve the problem?

Proportion of Undeclared Workforce 26%

40% Construction sector

7% Processing sector

Retail sector

17%

34% 30%

61%

Agriculture sector

Undeclared workers

33%

Semi-legal work

ÁGNES VINKOVITS

The amount in daily salary an employer can give under the simplified employment scheme has been increased to HUF 8,255 for non-skilled and

GRAND GALA

„COLOURS FOR CHILDREN”

Saturday, February 3, 2018 from 7 pm to midnight at Marriott Hotel Budapest Registration, welcome glass of champagne A word of welcome by Albert Royaards, President of Board of Trustees Gala dinner with painting and musical entertainment PROGRAM Master of Ceremonies: Hans Peterson • Amazing musical pieces presented by Apor Szűts and other young Hungarian talents of classical music from Virtuosos, introduced by András Batta • Speed painting show by Attila László Gyulai • Interactive painting surprise by Heringarts Design • 3D gallery experience Live auction Dancing to the tunes of Partyssimo Band Short break for: HUF 30.000 per seat or HUF 250.000 per table of ten Early reservations guarantee best available seats.

Dress code: black tie/dark suit For reservation, further details and any updates regarding the gala program, please visit WEBSITE. If you are not able to attend, please consider one or more „seat donations” of parents of hospitalized children, our own volunteers or for doctors/nurses in hospitals.

66%

Catering sector

50%

41%

The SMILING HOSPITAL FOUNDATION would be honoured by your presence at the

22.00 pm 22.30 pm 23.00 pm

27%

11%

29%

ADVERTISEMENT

19.00 pm 20.00 pm

28%

Lawfully employed

HUF 10,790 for skilled workers from January 1. In the scheme, parties can legally contract for a short period of time (even for one day) with very little administration and a fixed payroll tax the employer has to pay, amounting to just HUF 500 for seasonal work and HUF 1,000 for casual work. The agreement does not even have to be written; it is enough to register the employee with the tax authority via telephone, or make an application on the day of the work.

Besides casual and seasonal work mostly in the agriculture and construction sectors, for which simplified employment was primarily designed - the scheme also offers an opportunity to give a stamp of approval to the legally non-existing case of a work trial, as employers can easily declare the candidates even for a short period of time.

Seeking solutions to reduce the amount of undeclared work is clearly in the government’s interests. Black work not only has an adverse effect on the economy, but is obviously also disadvantageous for the employees themselves. Without a contract to refer to, workers are easy to exploit as they are less likely to make a complaint if, for example, their salaries are not fully paid or holidays are denied.

At the same time, it can also hit back on the employer. “Employers have to be aware that the labor law cases are public and so loan-giving banks as well as contracting partners might see an increased risk in it [working with a company having found to be using illegal practices],” recruiting company euCSOPORT’s expert Gábor Hoffmann says. He also notes that the possibility of higher loan interest and lost deals also have to be taken into consideration when deciding to leaving the legal path.

Black Work Still Widespread Yet, despite the fixed low price and the simple procedure for declaring workers in the simplified employment scheme, undeclared work is still widespread

BBJ infographic Source: NGM in the country. The latest, Q3 2017 data of the Ministry for National Economy (NGM) found

more than

20%

of workers at inspected companies were undeclared.

Also, as a completely new phenomenon, some previously legally employed workers went undeclared from the beginning of 2017, even though they have essentially remained doing the same job. “Employers probably decided to terminate legal employment because the minimum wage for skilled workers has been significantly raised,” NGM explains.

The construction sector is still the most polluted by black work. Inspections found 40% of the employees were completely undeclared (a 4% increase from 2016) in the sector, while another 34% were only semiillegal, meaning that workers were registered for shorter working hours or less salary than what had been agreed on in reality.

There is progress, however; the list of labor law cases published by Nemzeti Adó- és Vámhivatal (the National Tax and Customs Administration, or NAV) in early January, shows that while it is mostly SMEs that still take their chances with black employment, big companies are increasingly becoming more compliant with the laws. As the labor shortage is becoming more pressing, offering legal employment can be a key element in attracting workforce.

It is noteworthy, however, that the number of fines have been going consistently down. Long-term data on the fines shows that the global crisis made authorities more indulgent a decade ago, and the trend has not changed since then.

While NGM, during its latest inspection, found some type of violation at more than 10,000 companies, it imposed fines only on 1,100 businesses altogether, totaling a combined HUF 157 million.

Although the Budapest Business Journal specifically asked the NGM about the reason behind the relatively low level of fines, we had not received an answer by the time we went to print.

www.bbj.hu

3

Budapest Business Journal | January 26 – February 8, 2018

How Low can it Go?

Employers in Hungary have historically been exposed to a heavy tax burden. In 1996, they had to pay social security contributions of not less than 46.7%, which had gradually dropped to 22% by 2017. Thanks to the dynamic macroeconomic performance of the country, another cut of 2.5%

to

19.5%

“Our 9% corporate income tax rate, which is a record-low in the EU, has attracted a number of high-profile investments that work as key engines of the Hungarian economy in many areas,” Honyek says. “We agree that most Hungarian SMEs − which typically turn out modest profits, and thus hardly pay any corporate income tax − would have benefited a lot more from reducing employer costs further. But the current major objective, that is to get more foreign investors into the country, is better served by the 9% corporate income tax.”

Employee

Employer

or the guaranteed wage minimum (the lowest salary to be paid to a person with secondary education).

“We believe improving the situation of the private sector would justify - and budgetary conditions would allow - a total decrease of 5% for 2018 instead of the currently effective 2.5%,” the MKIK statement reads.

Other economists have gone further still and demand a 50% cut of the current total. This scenario presumes that employers’ profitability would soar, the extra funds could be used to raise wages, those growing incomes would fuel consumption, and ultimately less Hungarians would consider leaving the country. Some might even consider returning.

However, Péter Honyek, senior manager at PwC’s tax and international mobility unit stresses that all those hypothetical effects won’t necessarily translate into reality. Profits would not land with staff exclusively, not the whole portion of wage increases would be spent on products and services, and it is wishful thinking to expect Hungarian immigrants to turn up in droves just because of such a measure.

Economic Reality

“Pushing down the social security contribution rate by a single percentage point causes HUF 100 billion in less taxes,” says Honyek. “Therefore, a 10% decrease would add up to HUF 1 billion, which equals the budget tax revenues of one whole month. There is no way the state budget could handle such a large deficit, which would need to be compensated by new taxes. And that would question the sense of the entire measure.”

Employee+Employer combined

45.5% 27% 18.5%

1995

2000

2005

30% mark

was introduced as of January 1, 2018, which is half a percentage point more than had been initially envisaged.

According to the Hungarian Chamber of Commerce and Industry (MKIK), the picture is not all that rosy, though. As highlighted by its statement to the Budapest Business Journal, the reduction doesn’t fully offset the effects of heavy wage increases at micro enterprises and SMEs, with a large proportion of workers earning the minimum wage

The government has also come in for criticism from some quarters that, instead of reducing the corporate income tax to 9%, labor costs should have been cut even more significantly. However, Honyek argues that the primary aim of the government was to secure a better position in the international tax rivalry.

Foreign investors decide about a location foremost based on the level of corporate income tax, and not the tax burden on employers, which they rather regard as part of future wage costs.

70 60 50 40 30 20 10

Honyek recalls that the government has been going down the path of cutting labor costs with a view to economic reality. The fact that gross wages went up by 12.8% between October 2016 and 2017 can be mainly attributed to employers’ enlarged room for financial maneuver, which, in turn, is partly due to the reduced social security contributions payable by them.

Hungary’s scores are average by CEE comparison in terms of employer burden: social security contributions were well over the

LEVENTE HÖRÖMPÖLI-TÓTH

Benefit SMEs or Draw in FDI?

GROSS WAGE PERCENTAGE OF EMPLOYER AND EMPLOYEE SOCIAL SECURITY CONTRIBUTIONS IN HUNGARY 1996-2016

in Slovakia, Czech Republic, Estonia and Lithuania according to the Central Eastern European Tax Brochure 2017 by Mazars Group.

MKIK argues that, in terms of competitiveness, what has been truly decisive is the total cost of employment and the challenge to retain the right number of qualified staff. Reducing social security contributions would also greatly boost development and operational efficiency of enterprises, especially those that are capable of development. In the long run, pressure on wages should have a positive effect, since salary increases could be offset by improving efficiency and productivity. MKIK argues that the so-called tax wedge (the total amount of income tax plus employer and employee social security contributions as a percentage of labor costs) is still very high in Hungary.

Honyek holds that the 45% tax wedge for those with low or average incomes is large, indeed. On the basis of OECD statistics for 2016, Hungary was ranked among the countries with a high tax wedge. (Belgium leads the pack with 54%, whereas the average OECD figure is 36%.) The V4 average of 35-43% is still

2010

2015

Source: RSM

Employer social security contributions have been cut to a new low, though some are demanding even more to boost competitiveness. Economic reality might stand in the way of such wishful thinking.

Special Report | 13

2020

below Hungary’s. All that means that workers in lower income brackets carry a bigger burden than it is typical in other parts of CEE. On the other hand, workers earning higher than average wages enjoy a competitive tax wedge in the EU. “In most foreign countries, the tax wedge keeps going up substantially because of progressive tax rates, whereas in

“In most foreign countries, the tax wedge keeps going up substantially because of progressive tax rates, whereas in Hungary it remains stable.

The fact that highly skilled people could make handsome money here under the current conditions also explains that Hungarians do not go abroad to work because of the local tax regime.”

Hungary it remains stable,” notes Honyek. “The fact that highly skilled people could make handsome money here under the current conditions also explains that Hungarians do not go abroad to work because of the local tax regime.” By implication, changing it won’t bring them back.

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14 | 3

Special Report

www.bbj.hu

Budapest Business Journal | January 26 – February 8, 2018

Tax consultants yeaR establisHed no. of full-time employees on Jan. 1, 2018

vat

pit and soCial seCuRity

CoRpoRate tax

tRansfeR pRiCing

tax and finanCial due dilligenCe

industRy oR speCial taxes

adveRtising tax

exCise tax

auditing

aCCounting

payRoll aCCounting

finanCial Consulting

HR Consulting

Real estate Consulting

otHeR seRviCes

total net Revenue in 2017 (Huf mln)

Company Website

tax Consulting Related seRviCes

net Revenue fRom tax Consulting in 2017 (Huf mln)

Rank

Ranked by net revenue from tax consulting in 2017 (HUF mln)

3,048

21,952

1989 1,200

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

Rezső Rózsai, István Henye (Ÿ) KPMG (Ÿ)

Robert stöllinger, gábor beer William Curley Gabriella Liptay

1134 Budapest, Váci út 31.

(1) 887-7100 (1) 887-7101 info@kpmg.hu

904

1,839

2001 110

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

–

(100) –

zsolt kalocsai Klára Vaitz Szilvia Morvay

1138 Budapest, Faludi utca 3.

(1) 886-3700 (1) 886-3729 info@rsm.hu

770

770

2009 22

✓

✓

✓

✓

✓

✓

✓

✓

–

–

–

–

–

–

Individuals (100) –

károly Radnai – Kata Bock

1124 Budapest, Csörsz utca 43.

(1) 920-6800 – info@orientax.hu

595

2006 22

✓

– Leitner+Leitner International GmbH (100)

márta siklós, Judit Jancsa-pék – –

1027 Budapest, Kapás utca 6–12.

(1) 279-2930 – office@leitnerleitner.hu

806

1959 61

–

Individuals (100) –

márta sibinger Enikő Kovács Ágnes Kramer

1135 Budapest, Mór utca 2–4.

(1) 237-9810 (1) 237-9811 saldo@saldo.hu

404

2012 21

–

Individuals (100) –

zoltán lambert, tamás gyányi Andrea Potássy Tamás Dely

1143 Budapest, Stefánia út 101–103.

(1) 887-3700 (1) 887-3799 info@wtsklient.hu

2,700

1989 11

✓

(100) –

zoltán gerendy – –

1103 Budapest, Kőér utca 2 A (1) 235-3010 (1) 266-6438 office@bdo.hu

849

2002 91

–

Finacont Holding Befektetési Kft. (100) –

györgy pintér, ádám menich Gábor Kis –

1062 Budapest, Aradi utca 16. II. emelet 2.

(1) 345-0092 (1) 345-0093 finacont@finacont.com

szilvia sarkadi-nagy, ildikó miszori, lászló killik, ágnes kása-forgács – –

1146 Budapest, Zichy Géza utca 5.

(1) 422-1339 (1) 688-4869 info@bpokft.hu

oWneRsHip (%) HungaRian non-HungaRian

top loCal exeCutive Cfo maRketing diReCtoR

addRess pHone fax email

kpmg magyaRoRszág www.kpmg.hu 1

2

Rsm HungaRy zRt. www.rsm.hu

oRientax adótanáCsadó zRt. 3

www.orientax.hu

leitneR+leitneR tax kft. www.leitnerleitner.com

578

4

5

saldo pénzÜgyi tanáCsadó és infoRmatikai zRt.

478

www.saldo.hu

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

–

–

–

–

✓

–

✓

–

✓

–

Wts klient adótanáCsadó kft.

6

www.wtsklient.hu

404

✓

✓

✓

✓

✓

✓

✓

✓

–

–

–

–

–

bdo HungaRy (tax Consulting) 7

www.bdo.hu

330

finaCont szolgáltató és tanáCsadó kft.

8

9

www.finacont.com

bpo audit tax www.mgi-bpo.hu

129

113

614

2001 55

105

298

2001 17

207

1995 7

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

–

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

–

–

✓

✓

✓

✓

–

–

(100) –

✓

✓

✓

✓

✓

✓

✓

✓

–

✓

✓

✓

–

–

Gyöngyi Ferencz (Ÿ), Andrea Kuntner (Ÿ), Erik Thurn (Ÿ) –

gyöngyi ferencz, andrea kuntner, erik thurn – –

1134 Budapest, Váci út 33.

(1) 225-7575 (1) 225-7574 vgd.budapest@vgd.hu

–

Péter Bergmann (50), Péterné Bergmann (50) –

péter bergmann József Kiss, Sándor Soltész Sándor Soltész

1138 Budapest, Váci út 186.

(20) 745-7100 (1) 799-8865 bergmann@bergmann.hu

vgd HungaRy kft. www.vgd.eu 10

beRgmann KönyvszaKértő és adótanáCsadó kft.

11

www.bergmann.hu

104

✓

✓

✓

✓

✓

✓

✓

–

✓

–

–

–

–

www.bbj.hu

3

13

www.forbis.hu

pmx Consulting gRoup magyaRoRszág adótanáCsadó kft.

101

95

1994 5

500

1996 42

80

1990 5

201

1995 5

185

2006 26

42

156

1992 18

Ÿ

Ÿ

95

www.pmxconsulting.hu

14

15

aCCaCe HungaRy kft. www.accace.com

m-audit könyvvizsgáló, Fejlesztő és szolgáltató kft.

85

60

www.m-audit.hu

16

faiRConto zRt.

17

aRkConsulting kft.

48

www.fairconto.hu

www.arkconsulting.hu

43

✓

✓

✓

✓

–

–

✓

✓

–

✓

✓

✓

–

✓

✓

✓

Ÿ Ÿ Ÿ Ÿ

✓

✓

✓

✓

–

✓

✓

✓

Ÿ

–

–

–

✓

✓

Ÿ

–

–

✓

✓

–

✓

–

✓

–

–

–

✓

–

–

✓

✓

–

–

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–

–

–

–

✓

–

–

–

✓

Real estate Consulting

HR Consulting

finanCial Consulting

payRoll aCCounting

aCCounting

auditing –

oWneRsHip (%) HungaRian non-HungaRian

top loCal exeCutive Cfo maRketing diReCtoR

addRess pHone fax email

Individuals (100) –

gábor dénes, ferencné Wessely Gábor Dénes –

1119 Budapest, Pajkos utca 24.

(1) 382-0106 – tax@forbis.hu

–

János Szalai (97.78) Péter Natkay (2.22)

János szalai – –

1051 Budapest, Széchenyi István tér 7-8.

C.ép. 1. em.

(1) 803-7848 – info@pmxconsulting.hu

–

István Nemecz (30), ACCACE BPO Holding (70)

istván nemecz – Norbert Nagy

1132 Budapest, Váci út 30.

(1) 412-3530 (1) 412-3530 hungary@accace.com

–

György Kozma (90), Györgyné Kozma (10) –

györgy kozma Józsefné Kulifai István Rajkai

1142 Budapest, Erzsébet királyné útja 125.

(1) 460-7401 (1) 460-7491 m-audit@m-audit.hu

Zsolt Ruszin (50), Veronika Antal Ruszinné (50) –

zsolt Ruszin – –

1097 Budapest, Könyves Kálmán körút 12–14.

(1) 238-8023 (1) 238-8024 fairconto@fairconto.hu

–

ARK INVEST Magyarország Kft. (87), individuals (13) –

zsolt ilyés, krisztina garas kovácsné Krisztina Garas Kovácsné –

1064 Budapest, Izabella utca 66.

(1) 322-4260 – garas.krisztina@ arkconsulting.hu

andrea butkovics Ernő Varga Melinda Németh

1134 Budapest, Váci út 49.

(1) 452-6900 (1) 452-6910 info@colling.hu

–

Ÿ Ÿ Ÿ Ÿ Ÿ Ÿ Ÿ Ÿ

–

Special Report | 15

otHeR seRviCes

exCise tax

adveRtising tax

industRy oR speCial taxes

tax and finanCial due dilligenCe

tRansfeR pRiCing

CoRpoRate tax

pit and soCial seCuRity

101

2005 7

tax Consulting Related seRviCes

vat

12

foRbis adótanáCsadó kft.

yeaR establisHed no. of full-time employees on Jan. 1, 2018

Company Website

total net Revenue in 2017 (Huf mln)

Rank

net Revenue fRom tax Consulting in 2017 (Huf mln)

Budapest Business Journal | January 26 – February 8, 2018

–

–

✓

✓

✓

–

Colling Könyvelő és tanáCsadó kft. www.colling.hu 18

NR

abt HungáRia tanáCsadó kft. www.abt.hu

deloitte magyaRoRszág NR www.deloitte.hu

NR

ey magyaRoRszág www.ey.hu

gRant tHoRnton NR HungaRy www.grantthornton.hu

NR

Mazars KönyvszaKértő és tanáCsadói kft. www.mazars.hu

Ÿ

15,120(1)

Ÿ

14,815(3)

1993

Ÿ

1990(2)

Ÿ

1989 571(4)

✓

✓

✓

✓

✓

–

✓

✓

–

✓

–

Tünde Gulyás (50), Andrea Butkovics (50) –

Ÿ Ÿ Ÿ Ÿ

Ÿ

Ÿ

–

Ÿ ✓

✓

✓

–

–

–

József Láng (Ÿ), ABT Treuhand Vagyonkezelő Zrt. (Ÿ) ABT Finanzgesellschaft AG (Ÿ)

József láng – –

1037 Budapest, Montevideo utca 3/A (1) 430-3400 (1) 430-3402 abt@abt.hu

andrás fülöp Gerard Lucey Csanád Bánhegyi

1068 Budapest, Dózsa György út 84/C (1) 428-6800 (1) 428-6801 deloitteinhungary@ deloittece.com

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

– (100)

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

– Ernst & Young Center Cluster Limited (100)

botond Rencz Csaba Horváth Ágnes Pellion

1132 Budapest, Váci út 20.

(1) 451-8100 (1) 451-8199 mailbox.ey@hu.ey.com

Waltraud körbler, jános Kővágó, ágoston Jakab – –

1093 Budapest, Vámház körút 13.

(1) 455-2000 – office@hu.gt.com

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

–

–

AAH Management Kft. (Ÿ), SmartCorpFin Pénzügyi Tanácsadó Kft. (Ÿ) IB Interbilanz Holding Wirtschaftsprüfung GmbH (Ÿ), GT Advisory s.r.o. (Ÿ)

Ÿ

1,320

1991 85

Ÿ

Ÿ

1991 130

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

–

–

Individuals (3) Mazars S.A. (97)

philippe michalak budzan – Eszter Rozgonyi

1123 Budapest, Nagyenyed utca 8–14.

(1) 429-3010 (1) 235-0481 mazars@mazars.hu

Ÿ

17,063(3)

1989 797

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

– PwC CEE (100)

nick kós, tamás lőcsei Tamás Pál Borbála Palotai

1055 Budapest, Bajcsy-Zsilinszky út 78.

(1) 461-9100 (1) 461-9101 info@hu.pwc.com

Ÿ

1,284

✓

✓

✓

✓

✓

–

✓

–

✓

✓

✓

✓

–

✓

– Rödl International GmbH (100)

Roland felkai – –

1062 Budapest, Andrássy út 121.

(1) 814-9800 (1) 814-9899 budapest@roedl.hu

pWC magyaRoRszág www.pwc.hu NR

Rödl & paRtneR magyaRoRszág NR

www.roedl.hu

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

1991

Ÿ

This list was compiled from responses to questionnaires received by January 24, 2018 and publicly available data. Data is based on companies’ own data revelations. To the best of the Budapest Business Journal’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, Madách Imre út 13–14., or faxed to (1) 398-0345. The research department can be contacted at research@bbj.hu

NOTES: (1) Data of 2016. of Deloitte’s subsidiaries, Deloitte Zrt. provides tax services. (2) Establishment year of Deloitte Üzletviteli és Vezetési Tanácsadó Zrt. (3) Data of business year July 1, 2016-June 30, 2017, consolidated management revenue. (4) Data of June 30, 2017.

16 | 3

Special Report

www.bbj.hu

Budapest Business Journal | January 26 – February 8, 2018

Accountancy Market Talk: Competition Over Smart Solutions Accounting is increasingly driven by innovation and the application of disruptive technologies that matter more now than how much is charged for the service.

for being major players on the market.

As he explains, compliance requires substantial resources on the part of companies and consultants alike. Just take compulsory online invoicing or obligations in relation to the transfer price regulation.

“Enterprises, being already under heavy pressure because of the labor shortage and high wage expectations, were relieved by the reduction of employer social security contribution,” he says.

LEVENTE HÖRÖMPÖLI-TÓTH

We have come a long way from manual bookkeeping to today’s highly digitalized world, and major players of the domestic accountancy market are apparently doing everything in their power to embrace the latest trends.

“The accounting industry has not only been supported but has been boosted by IT developments for years now,” Orsolya Ignácz, services director at TMF Magyarország Kft., tells the Budapest Business Journal. “Innovative IT in accounting and tax administration should not be seen as an attractive additional option; it is necessary if you wish to outperform client expectations and also to meet tax authority obligations efficiently.”

allow us to focus better on advisory work itself,” he says.

TMF Group has implemented an industry-leading platform for automated tax compliance and management, Ignácz informs the BBJ. “We have a global expense management tool for our clients and we also have a very exciting middleware product in the HR and payroll space, a portal that provides decision makers with complete visibility and control of their global payroll operations and data - from HQ to their most remote offices,” she says. Besides, TMF has its own internal software and innovation expert team that realizes the innovation aspirations of the firm.

Colling Kft. says it is equally prepared to tackle the digital challenge. Its accounting software is an integrated system that tracks everything from taking orders to stock inventory to recording payment of invoices. Accountants thus have more time to dig deeper in the corporate processes of enterprises.

“In this way reports can become pretty much up-to-date, whilst swift feedback allows the management to optimize business processes,” Butkovics observes.

Along similar principals Colling’s webpage is being fully renewed whereby interaction will assume a key role.

This is to ensure more feedback and as much genuine customer information as possible.

our Facebook traffic exploded.

Communication related to our awards, namely the ones for being a family-

“Quality is taking center stage to replace pricebound priorities…

As working processes requiring unskilled work are being increasingly automated, the value of skilled work has risen in parallel.” friendly workplace and a responsible employer, have already attracted new talent.”

TMF Magyarország Kft. are also engaged with social media. “We communicate directly with our existing and prospective clients through our official LinkedIn and Twitter accounts, and we are doing a lot of recruitment outreach on LinkedIn, Twitter and Facebook with great results,” reports Ignácz.

Content Marketing Andrea Butkovics, Colling Kft. “Maybe also for that very reason, demand for outsourcing tax and accounting services has been on the rise.”

According to Andrea Butkovics, managing director of Colling Kft., competition is no longer predominantly over prices, but rather smart solutions.

In her experience, clients can - and are increasingly willing to - pay for high quality services that feature competence, foreign language knowledge and professional IT support. In fact, this attitude is becoming more of a pattern in the Hungarian economy.

Quality Takes Center Stage “Quality is taking center stage to replace price-bound priorities,” she adds mentioning that the phenomenon is apparent most of all on the labor market. “As working processes requiring unskilled work are being increasingly automated, the value of skilled work has risen in parallel.”

That value certainly goes up if expertise goes hand-in-hand with the use of disruptive technologies that can boost efficiency enormously. Hegedüs Sándor Hegedüs, RSM Hungary. detects growing demand for such solutions on the part of SMEs in the field of financial administration. RSM The above statement is clearly relies on both internal and external confirmed by Sándor Hegedüs, tax partners to meet that demand, and in partner at RSM Hungary, whose tax doing so it strives to anticipate customer and accounting divisions are known needs. “Such digital solutions also

Funds are earmarked for other forms of online presence at Colling Kft. as well. Content marketing is among the most widely used tools. And practice shows the effort pays off. The fact that the company’s presentations and

“Habits as to how to gather information or to communicate are constantly changing, and it makes sense to keep track of such trends and act accordingly. But it is also fluctuating as members of certain age groups enter a social media platform or withdraw from there.” articles are shared on the internet has landed several assignments, many of them covering the full spectrum of accounting services.

“Our behind-the-scenes posts also play well with the public,” Butkovics agrees. “When we wrote about our new childcare room, for instance,

Orsolya Ignácz, TMF Magyarország Kft. RSM follows a similar path. And Hegedüs adds that social media can successfully support recruitment and education, even though certain plans in the pipeline are actually aimed at restricting overly intensive corporate communication that invades privacy.

“Habits as to how to gather information or to communicate are constantly changing, and it makes sense to keep track of such trends and act accordingly,” Hegedüs notes. “But it is also fluctuating as members of certain age groups enter a social media platform or withdraw from there.”

www.bbj.hu

3

Budapest Business Journal | January 26 – February 8, 2018

Processing the Solutions Andrew Majlath, together with partners János Babos and András Szalai, have developed Process Solutions (PS), an accountancy and bookkeeping company, from a 50-employee flotsam entity in 2002 to a 450-strong operation with net revenues of EUR 13 million. Today, PS has its own offices in five central-European capitals, plus an alliance of 40-odd partners giving it a pan-European network of 5,000 people serving 500 clients. This is how they did it.

KESTER EDDY

In 2002, the collapse of Arthur Andersen, then one of the global “Big Five” professional services providers, sent shock waves throughout international business. The effects were also felt in Central Europe, although the transfer of local Andersen partnerships - mostly to former competitors - was largely accomplished smoothly.

But in Hungary, at least, it left one orphaned off-shoot. In the late 1990s, Arthur Andersen had created a network of “simple” accounting subsidiaries designed to attract third-party clients - an early form of business process outsourcing - incorporated under the name Process Solutions.

“Nobody really wanted this lowmargin, BPO bookkeeping thing; it wasn’t fashionable to suddenly have a bookkeeping company within an audit firm, given the allegations of conflict of interest which led to the collapse of Andersen in the first place,” says Andrew Majlath, who at the time was a freelance consultant in Budapest.

Majlath says he’d like to avoid it, but “everyone knows costs are rising”.

Best Testament

Andrew Majlath.

But János Babos, who had developed the Andersen Process Solutions unit from scratch to

50

employees,

soon persuaded Majlath - a trusted former colleague (see box) - to join him running the operation as a stand-alone accounting and payroll provider.

“János called me and said the stuff had hit the fan. We had lunch. One option was to do a management buy-out. I said, if we go 50-50, I’m in. We more or less agreed upon it at that lunch,” Majlath recalls.

Motivating Staff

The new team negotiated the buy-out with Andersen - including a delayed pay-off and set about motivating staff.

“Suddenly, people were not working for a big multi-national, but a small, Hungarian Kft. owned by this new guy who’s just jumped in. I remember drawing

“Nobody really wanted this low-margin, BPO bookkeeping thing; it wasn’t fashionable to suddenly have a bookkeeping company within an audit firm, given the allegations of conflict of interest which led to the collapse of Andersen in the first place.” up a map of Europe, and saying: ‘We still have international clients and we need to reconnect with some of the other countries’,” Majlath recalls.

From the off, the new PS had a career development vision enabling new graduates to train to full-professional

Special Report | 17

standards. As part of that training, employees were (and are) regularly seconded to other companies - typically expanding shared service centers - to help them fill gaps.

“This is not just temping work. Working in a different environment, on a different system, [it’s] part of the development experience that grows them,” he argues.

PS also sought to grow and provide value for money as part of its core ethos.

When a competitor offered a buy out in 2004, management pondered, but rejected the offer.

“They were about 80 [employees], and us 70 at the time. They were more focused on higher margins, in squeezing more money out of each customer. We would have hurt our clients, quite badly, by allowing them to acquire us,” says Majlath - who points out that, were it not for another acquisition, that same company would have barely grown its Hungarian operation in the 14 years since.

Going Regional

After growing at 10-30% per year, PS decided to open up regional subsidiaries, starting with Bucharest

in

2007,

followed by Prague, Warsaw and Bratislava.

Though a valuable contribution to the whole, these ventures have failed to replicate the levels of success of Budapest, and today employ about 100 equivalent full-time staff, compared with 350 in the home office.

“It was harder than we first thought,” says Majlath, who found a policy of careful selection of local partners across Europe, with Budapest as the controlling hub, a more effective route to international expansion.

PS has also felt the effects of the labor shortage in Hungary, forcing it to both limit the number of loanee employees (it’s currently about 40) and raise fees for the first time in 12 years.

But rather than statistics, perhaps the best testament to PS’ business policy is from Wizz Air, a client first acquired when both companies were in formation. (Wizz is now PS’s largest customer.)

“Process Solutions have been providing the bookkeeping and tax compliance services for the Wizz Air Group from the start,” Zsolt Németh, head of accounting and taxes at the low-cost carrier, told the Budapest Business Journal.

“It is important to understand what contrast this shows: they started when Wizz had just got incorporated, and as such we were probably the smallest of their clients, with only a few people and present in just one country,” he said.

Fifteen years later, with Wizz Air listed on the London Stock Exchange and its 3,500 employees producing revenues of EUR 2 billion, the airline needs such services in 16 countries - and Process Solutions is “still doing it”.

“To me this indicates customer focus, flexibility, and a long-term focus - and probably many other good things,” says Németh. “For us at Wizz Finance, it has been comforting to have such a partner on our side on this long and challenging journey.”

A ‘Secret Weapon’ For Arthur Andersen.

Andrew Majlath, the son of 1956 refugees, grew up in Letchworth, England. He fondly remembers visiting Hungary first in 1966.

“The car was loaded, springs at the bottom. We brought Wilkinson Sword [razor blades] - you couldn’t get that quality in Hungary [then],” he says.

After first studying architecture and civil engineering, he switched to accountancy, becoming fully qualified with Arthur Andersen in London in 1991, only to transfer to Budapest almost immediately on a two-year contract.

It was the beginning of the transition, and effectively of modern accounting in the country.

“I was a kind of ‘secret weapon’, because I could speak Hungarian.

We worked on companies like Ikarus [bus maker] and Centrum, the department store chain.”

It was then that he met János Babos, and many of the professionals he has subsequently worked with.

“It was the first ever audit that they were doing, and it was for the reason that they wanted to show their numbers to potential investors,” he says.

“To get three years’ worth of history together, these jobs took months. You were essentially rebuilding all of the past figures, and that takes a long time, especially because you’ve got to put your name on it and sign it to say it’s right. Then it has to be done very carefully.”

18 | 3

Special Report

www.bbj.hu

Budapest Business Journal | January 26 – February 8, 2018

Accounting firms

www.ps-bpo.com

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Wizz Air, British Petroleum

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–

–

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–

oWneRsHip (%) HungaRian no-HungaRian

top loCal exeCutive Cfo maRketing diReCtoR

addRess pHone fax email

285 1999

János Babos (50), Process Solutions International Kft. (50) –

jános babos, andrew majlath, andrás szalai – –

1134 Budapest, Váci út 33.

(1) 451-7100 (1) 451-7196 info-hu@ps-bpo.com

✓

183 1994

– TMF Group Invest Two B.V. (100)

eloi malta-bey, orsolya ignácz Zsuzsanna Táborszki Cselovszkiné Gábor Váradi

1138 Budapest, Népfürdő utca 22.

Duna Tower (1) 461-3100 – hungary@tmf-group.com

(100) –

péter Hajnal – –

1103 Budapest, Kőér utca 2/A (1) 235-3010 (1) 266-6438 office@bdo.hu

(100) –

Zsolt kalocsai Klára Vaitz Szilvia Morvay

1138 Budapest, Faludi utca 3.

(1) 886-3700 (1) 886-3729 info@rsm.hu

HR Consulting

tRansfeR pRiCing

m&a

audit

management Consulting

tax Consulting

majoR Clients in 2017

finanCial Consulting

otHeR seRviCes payRoll aCCounting

pRepaRation of montHly and annual RepoRts

pRepaRation of ifRs RepoRts and finanCial statements

aCCounting tRaining

aCCounting Consulting

pRepaRation of aCCounting poliCy

RevieW of bookkeeping WoRk peRfoRmed by a gRoup entity abRoad (ssC)

total net Revenue in 2017 (Huf mln)

pRoCess solutions kft. 2,730 5,376

speCial aCCounting seRviCes

no. of full-time employees on jan. 1, 2018 yeaR establisHed

1

Company Website

net Revenue fRom aCCounting in 2017 (Huf mln)

Rank

Ranked by net revenue from accounting in 2017 (HUF mln)

✓

tmf magyaRoRsZág kft. www.tmf-group.com

1,500(1) 3,313(1)

2

✓

✓

✓

✓

✓

✓

Ÿ

✓

✓

–

–

–

✓

–

bdo HungaRy (aCCounting, payRoll and outsouRCing) 3

4

www.bdo.hu

Rsm HungaRy ZRt. www.rsm.hu

1,065 2,700

–

✓

✓

✓

✓

✓

Ÿ

✓

✓

✓

✓

✓

✓

✓

✓

66 1989

✓

✓

–

✓

✓

✓

✓

110 2001

876

1,839

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✓

✓

–

✓

✓

Ÿ

✓

869

921

–

✓

✓

–

✓

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Ÿ

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–

✓

✓

✓

–

✓

–

119 1990

Péterné Bergmann péter bergmann, (50), péterné bergmann Péter Bergmann (50) József Kiss – Sándor Soltész

720

849

✓

✓

✓

–

✓

✓

Ÿ

✓

✓

✓

✓

–

–

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✓

91 2002

Finacont Holding Befektetési Kft. (100) –

BerGMann KönyveLő iRoda pÉnZÜgyi sZolgáltató kft.

5

www.bergmann.hu

finaCont sZolgáltató És tanáCsadó kft.

6

www.finacont.com

COMPANIES ARE OBLIGED TO REPORT VAT ONLINE TO THE TAX AUTHORITY Crowe FST calls the attention of entrepreneurs to a change in Hungarian legislation. From July 1, 2018, all data of those output invoices that contain VAT of at least HUF 100,000 should be reported online to the National Tax and Customs Administration (NAV).

Since the standard rate of Hungarian VAT is 27%, this means that, generally, invoices with a net value of at least HUF 371,000 should be reported. Taxpayers need to ensure that their invoicing software is capable of online data provision to NAV. Presently, output invoices with VAT content of at least HUF 1 million should be reported as part of the monthly or quarterly VAT return. This reporting obligation will be replaced by online reporting and the threshold reduced to HUF 100,000.

The tax advisors of Crowe FST recommend that those companies that use standard software packages for invoicing get in contact with the software developer in order to make reconciliations about shifting to a new version of the software. For those companies that develop their own invoicing software, it is advisable

györgy pintér, ádám menich Gábor Kis –

1138 Budapest, Váci út 186.

(1) 238-9000 (1) 238-9010 bergmann@bergmann.hu

1062 Budapest, Aradi utca 16. II. emelet 2.

(1) 345-0092 (1) 345-0093 finacont@finacont.com

Therefore, we recommend that those companies which receive invoices with particularly large amounts or establish relationships with new vendors, verify whether the vendors comply with their reporting obligations. NAV is to set up an online web portal to update the software as soon as possible. In the where buyers can check whether their vendors fulfil case of Hungarian subsidiaries of international groups, their reporting obligations about the relevant invoices. it is particularly important to start preparations early, because software developments tend to be made at group level, while the software should comply with complex Hungarian regulations.

Crowe FST is an independent member of Although the change in legislation will be effective Crowe Horwath International. Crowe Horwath from July 1, the reporting system of NAV is already in International, ranked as the eighth largest global operation and companies can join it now for testing accounting network, consists of more than 200 purposes. independent accounting and advisory services It is worth involving reliable professionals into the above firms in close to 130 countries around the world. procedures, because penalties for non-compliance Crowe FST provides accounting, payroll, audit, will be high. The penalty for default or delay in data tax advisory, information security services and provision or for the provision of erroneous or false complete solutions to Hungarian and multinational data may be up to HUF 500,000 per invoice. companies, government bodies and domestic The new rule concerns not only sellers, but buyers as institutions of the EU. well. Recently, the European Court and the Hungarian Tax Authority have applied the principle that buyers are entitled to deduct the VAT content of input invoices from their tax base only if they act with due care in order to verify whether their vendors have acted lawfully.

www.bbj.hu

3 otHeR seRviCes

–

–

–

–

437

437

–

✓

✓

–

✓

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Ÿ

✓

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–

–

–

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56 1990

Zoltán Tóth (50), Péter Berta (50) –

péter berta – –

8900 Zalaegerszeg, Ady utca 2.

(92) 550-050 (92) 550-060 whc@whc.hu

(100) –

gábor Rajkai Józsefné Kulifai István Rajkai

1142 Budapest, Erzsébet királyné útja 125.

(1) 460-7412 (1) 460-7490 mlx@memolux.hu

Individuals (100) –

ferenc kölber – –

1124 Budapest, Jagelló út 14.

(1) 225-3490 (1) 225-3491 info@crowehorwath.hu

–

55 2001

(100) –

szilvia sarkadinagy, ildikó miszori, lászló killik, ágnes kása-forgács – –

1146 Budapest, Zichy Géza utca 5.

(1) 422-1339 (1) 688-4869 info@bpokft.hu

–

42 1996

István Nemecz (30) ACCACE BPO Holding (70)

istván nemecz – Norbert Nagy

1132 Budapest, Váci út 30.

(1) 412-3530 (1) 412-3530 hungary@accace.com

Attila Kollár (100) –

balázs szentirmai – –

1117 Budapest, Szerémi út 7/A (1) 464-4340 (1) 464-4349 szentirmai.balazs@ econoserve.hu

HR Consulting

–

tRansfeR pRiCing

–

m&a

✓

audit

✓

management Consulting

Ÿ

tax Consulting

✓

finanCial Consulting

✓

majoR Clients in 2017

payRoll aCCounting

–

pRepaRation of montHly and annual RepoRts

✓

pRepaRation of ifRs RepoRts and finanCial statements

✓

aCCounting tRaining

–

aCCounting Consulting

701

Individuals (100) –

pRepaRation of aCCounting poliCy

681

67 1998

RevieW of bookkeeping WoRk peRfoRmed by a gRoup entity abRoad (ssC)

no. of full-time employees on jan. 1, 2018 yeaR establisHed

speCial aCCounting seRviCes

Special Report | 19

oWneRsHip (%) HungaRian no-HungaRian

total net Revenue in 2017 (Huf mln)

Company Website

net Revenue fRom aCCounting in 2017 (Huf mln)

Rank

Budapest Business Journal | January 26 – February 8, 2018

Wts klient kft. www.wtsklient.hu 7

top loCal exeCutive Cfo maRketing diReCtoR

addRess pHone fax email

Zoltán lambert, György Kőrösi, eszter balogh, andrea potássy Andrea Potássy Tamás Dely

1143 Budapest, Stefánia út 101–103.

(1) 887-3700 (1) 887-3799 info@wtsklient.hu

WHC aCCounting kft. www.whc.hu 8

9

MeMoLuX Szervező, FejLeSztő éS sZolgáltató kft.

388

390

✓

✓

✓

✓

✓

✓

Ÿ

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–

✓

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49 1989

346

1,145

✓

✓

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–

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Ÿ

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–

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–

56 2002

www.memolux.hu

CRoWe fst Consulting kft. www.crowehorwath.hu 10

bpo audit tax 11 www.mgi-bpo.hu

aCCaCe HungaRy kft.

12 www.accace.com

eConoseRve gaZdasági 13 tanáCsadó kft. www.econoserve.eu

303

290

614

500

–

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✓

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–

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–

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–

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Ÿ

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–

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–

–

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50 1991

✓

✓

✓

289

633

–

✓

✓

–

–

✓

Shell, Praktiker, Kika, Santa Fé, Cognizant

187

364

–

✓

✓

–

✓

✓

Ÿ

✓

✓

✓

✓

–

✓

–

✓

33 1995

– Alessandro Farina (100)

alessandro farina – –

1056 Budapest, Váci utca 81.

(1) 269-5679 (1) 269-5625 info@itlgroup.hu

183

298

✓

✓

✓

–

✓

✓

Ÿ

✓

✓

✓

–

–

✓

✓

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17 2001

Gyöngyi Ferencz (Ÿ), Andrea Kuntner (Ÿ), Erik Thurn (Ÿ) –

gyöngyi ferencz, andrea kuntner, erik thurn – –

1134 Budapest, Váci út 33.

(1) 225-7575 (1) 225-7574 vgd.budapest@vgd.hu

– Leitner + Leitner Österreich Wirtschaftsprüfungs GmbH (55), Leitner + Leitner International GmbH (45)

márta siklós – –

1027 Budapest, Kapás utca 6–12.

(1) 209-4874 – office@leitnerleitner.hu

itl gRoup kft. www.itlgroup.hu 14

vgd HungaRy kft. www.vgd.eu 15

leitneR+leitneR audit kft.

16

www.leitnerleitner.com

BiLance KönyveLő éS 17 adótanáCsadó kft. www.bilance.hu

balanCe kft.

18

www.balancekft.hu

19

faiRConto ZRt. www.fairconto.hu

161

154

145

134

379

209

145

201

✓

–

–

–

✓

–

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✓

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–

–

–

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–

–

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Ÿ

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23 1994

✓

WF Építőipari Kft., SCargo Szállítmányozási Kft., Benex Trans Árufuvarozási Kft., Transcar Hungária Kft., Usovsko Kft.

✓

–

✓

–

–

–

–

–

23 1990

SASK Gazdasági Tanácsadó Kft. (100) –

Csaba molnár – –

2900 Komárom, Erdélyi utca 4.

(34) 540-770 (34) 540-779 bilance@bilance.hu

✓

Újpesti Egészségügyi Szolgáltató nonprofit Kft., Dél-Budai Egészségügyi Szolgálat nonprofit Kft. Jäger Transport Kft., Jäger Szolgáltató Kft., BKB Solutions Kft.

–

14 1990

József Dencsi (90), Tibor Dencsi (10) –

józsef dencsi, mária Csonka, orsolya viktor – Attila Körmöci

1119 Budapest, Fehérvári út 44.

(1) 209-6448 (1) 209-5568 balance@balancekft.hu

✓

Elite Cosmetix, ALD Automotive, MLINAR, Clearwater, Szabó Família

5 1995

Zsolt Ruszin (50), Veronika Antal Ruszinné (50) –

Zsolt Ruszin – –

1097 Budapest, Könyves Kálmán körút 12–14.

(1) 238-8023 (1) 238-8024 fairconto@fairconto.hu

✓

✓

–

✓

NOTES: (1) Aggregate figure of TMF Magyarország Kft. and UCMS Group Hungary Kft. The two companies merged in summer 2017.

–

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–

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Budapest Business Journal | January 26 – February 8, 2018

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–

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105

111

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Ÿ

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✓

✓

✓

✓

–

✓

3 2000

(100) –

tibor papp – –

1114 Budapest, Bartók Béla út 29.

(21) 311-1510 (21) 311-1520 iroda@iriszoffice.hu

–

16 2010

Tibor Kmeczó (100) –

tibor kmeczó – –

1201 Budapest, Berkenye sétány 5.

(1) 219-0991 (1) 219-0992 info@perscriptor.hu

–

8 2003

Eszter Danku-Szigecsán (100) –

eszter danku-szigecsán – –

1011 Budapest, Szilágyi Dezső tér 1.

(1) 700-4141 (1) 700-4545 info@grandconsulting.hu

–

6 2007

Individuals (100) –

beáta kincs – –

4026 Debrecen, Bem tér 14.

(1) 279-1722 (1) 279-1723 office@audit.labtech.hu

✓

7 1990

Csaba Benedek (70), József Benedek (30) –

Csaba benedek – –

1033 Budapest, Laktanya utca 35.

(1) 439-2306 (1) 439-2303 kozpont@adószabaszat.hu 6721 Szeged, Juhász Gy. utca 11.

(62) 323-625 – titkarsag@ framekonyveles.hu

HR Consulting

✓

tRansfeR pRiCing

✓

m&a

–

audit

✓

management Consulting

Ÿ

tax Consulting

✓

finanCial Consulting

✓

majoR Clients in 2017

payRoll aCCounting

–

pRepaRation of montHly and annual RepoRts

✓

pRepaRation of ifRs RepoRts and finanCial statements

✓

aCCounting tRaining

–

aCCounting Consulting

156

Tünde Gulyás (50), Andrea Butkovics (50) –

pRepaRation of aCCounting poliCy

114

18 1992

RevieW of bookkeeping WoRk peRfoRmed by a gRoup entity abRoad (ssC)

no. of full-time employees on jan. 1, 2018 yeaR establisHed

speCial aCCounting seRviCes

oWneRsHip (%) HungaRian no-HungaRian

total net Revenue in 2017 (Huf mln)

Company Website

net Revenue fRom aCCounting in 2017 (Huf mln)

Rank

20 | 3

coLLinG KönyveLő éS tanáCsadó kft. www.colling.hu 20

21

ÍRisZ offiCe ZRt. www.iriszoffice.hu

peRsCRiptoR 22 KönyveLőiroDa KFt. www.precizkonyveles.hu

gRand Consulting kft.

23 www.grandconsulting.hu

audit-labteCH kft.

24 www.audit.labtech.hu

adósZabásZat KönyveLő, 25 BérSzÁMFejtő, éS adótanáCsadó kft.

84

68

62

61

94

68

62

66

–

–

–

–

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✓

✓

✓

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–

–

–

✓

–

✓

–

–

✓

Ÿ

✓

Ÿ

✓

Gyulai Kft., CívisSeed Kft., VB2MW Kft., Mustang Hungária Kft., Safety-Kleen Kft.

✓

Ÿ

✓

✓

✓

✓

✓

–

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Budapest Business Journal | January 26 – February 8, 2018

Photo by: Debby Wong/Shutterstock.com.

Rod Stewart and Living the Expat Life David Holzer tries to decide whether to see Sir Rod Stewart at the Budapest Arena on January 29. He likes the ageing rocker, but does he want to go simply because Stewart is English and Holzer is feeling the need to reconnect with his own Englishness?

Like it or Loathe it

For the uninitiated, Marmite is a sticky brown paste made from yeast extract, a by-product of brewing, with an extremely strong, salty flavor. A little of it goes a very long way. Introduced in 1902, it is part of English life but it also polarizes opinion – in the same way as does “Do Ya Think I’m Sexy” you could say.

Since 1996, Marmite has built its advertising around the idea that you either love or hate it. This has led to what’s called the “Marmite effect” entering English pop culture.

If you’re not English, you may well have no idea what Marmite is. Even if you do, it’s pretty hard to describe.

When I was growing up, Marmite was ubiquitous. I would imagine more for its supposed nutritional value than the taste. And, despite the levels of salt it contains, Marmite really is good for you. It’s rich in vitamin B and almost gluten free.

What’s interesting is that Marmite seems to be as popular as it ever was.

In

2016,

DAVID HOLZER

Actually, Stewart may well call himself British. He’s Scottish on his father’s side and fiercely proud of his ancestry.

Despite this, he’s as English as they come. But, like the Rolling Stones, Bowie and others of his generation of rock and roll peacocks who made it to the topper most of the popper most in the early 1970s, he left the UK in 1974 when the government raised taxes for high earners to around 90%.

At the time, Stewart claimed to the music press, who thought he was betraying the land of his birth, “It’s just not worth living in England any more”.

Ironically, in that same year Stewart told US magazine Rolling Stone that his reason for emigrating was because he didn’t want to be a performer for the rest of his life. Today, he is 72 and shows no sign of retiring. Which is good for the people of Budapest.

For the better part of his career, Stewart has been known as a flashy, dynamic stage performer. Now, by all accounts, he’s slowed down and can’t quite hit the notes he used to. But the essence of the Rod hasn’t changed.

Despite being knighted, he still dresses like a rocker, with his hair teased into signature drowned rooster spikes. His voice is still a melodic rasp.

According to recent reviews of his shows, Stewart still kicks footballs into the crowd from the stage – exactly as he did in the early days. Unlike the

by how the Sir Rods of this world are fanatical about staying connected to Blighty. I wonder if he’s one of those people who must have a jar of Marmite in the cupboard at all times.

Singer Rod Stewart performing at Jones Beach Theater on July 18, 2017 in Wantagh, New York. wild and crazy days of the 1970s, this is accompanied by warnings to his somewhat more mature audience to beware of low-flying balls.

Back Catalogue

Apart from the fun and games, Stewart’s show adds up to a stroll through a back catalogue that contains the amount of hits you’d expect from an artist who’s apparently sold around

100 million

records.

So, if you’re a fan from the early days, you’ll probably get to listen to classics like “Maggie May”. If you got into Sir Rod when he went rather more unabashedly showbiz, you’ll hear the silly but impossible to dislike “Do Ya Think I’m Sexy?”, which was remixed and re-released in August last year featuring American band DNCE. At the more tasteful end of the spectrum, Sir Rod will no doubt also offer up chestnuts like “I Get a Kick Out of You” or “Fly me to The Moon” that feature on his five hugely successful Great American Songbook albums.

Despite being hugely successful in the United States, Sir Rod recently moved

back to the United Kingdom. The reason he gave was that England has always been in his heart. In common with so

“For me, one of the great joys of living in another country is diving deep into its cuisine. Especially as I haven’t got much further than Szeged’s superb fish soup or the lángos from our local market and I’m yet to acquire a taste for tejföl.” many other performers and people in the rock and roll and film industries, he’s managed to live most of the last 40 or so years in the States without appearing to have been affected by the experience one bit.

As someone who’s lived outside of the United Kingdom for the past 15 years, I’ve always been fascinated and amused

Tesco refused to stock Marmite when makers Unilever announced it would put up the price. Tesco triumphed in the pricing dispute (called, of course, Marmitegate) and the result was that the spread reappeared on the supermarket’s shelves. After the victory, shoppers bought an extra 130,000 jars in a few days.

It’s thanks to Tesco that Hungarians and anyone in this country who’s curious can try Marmite. They certainly stock it at my local store. But, although Hungarians do clearly like salt, I’m not so sure what they’d make of Marmite. I can’t say that I’ve been tempted to buy a jar.

Because, for me, one of the great joys of living in another country is diving deep into its cuisine. Especially as I haven’t got much further than Szeged’s superb fish soup or the lángos from our local market and I’m yet to acquire a taste for tejföl – Hungarian sour cream.

And with this in mind, perhaps I should give Rod Stewart a miss and check out Algiers, the experimental American band playing at A38 Ship on the same night. I have no idea whether Algiers is any good or not, but the A38 is a venue, set in a reconditioned Ukrainian stone-carrier ship moored on the Danube, that looks intriguing.

Find out more about A38 Ship at www.a38.hu. Tickets for Sir Rod might still be available at www.ticketpro.hu. Good luck!

22 | 4

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www.bbj.hu

Budapest Business Journal | January 26 – February 8, 2018

Race is on for ʼMeal of Hungary 2018ʼ and Best Mass Catering Awards Two nationwide cooking contests aim to place the limelight on sustainable and innovative gastro solutions. The idea is to make quality trickle down from top dining establishments to everyday lives.

LEVENTE HÖRÖMPÖLI-TÓTH

The fact that the European finals of the world’s leading cooking contest, Bocuse d’Or was held in Budapest last year is just another indication that Hungary is claiming a spot on the fine dining map. But there are also various

“Domestic Flavors, Realistic Future” refers to the expectations of the jury of renowned professionals for an easy-to-make, innovative meal prepared from Hungarian ingredients that builds on classic tastes, yet is simultaneously modern. The final is scheduled for May 26, and will host the 12 best teams, which are bound to use bio buckwheat and Makó onions.

The competitions were launched at the Budapest Business School (BGE), Hungary’s largest university of applied sciences, which also runs the country’s most prestigious catering faculty. In fact, it has just finished a major

HUFrefurbishment 80 million

initiatives out there to make sure that quality food is not restricted to high end restaurants.

One of such efforts is ‘OKÉS’, a contest for mass caterers, which has already built a tradition. The contest, organized by the Association of Hungarian Chefs (ÉTREND, which translates as “diet”) and the National Federation of Catering Executives (ÉLOSZ) for the seventh time in 2018, challenges mass caterers to prepare the most delicious three-course canteen menu in the country.

This year’s motto is “Innovative sustainable mass catering”, and two-person teams are invited to make meals using two key ingredients, namely millet and chicken

drumsticks. The final is scheduled to take place on June 16. “The objective of the government is to push canteens to use the least possible artificial and the most possible natural ingredients in school catering,” said State Secretary of the Ministry for Human Resources Bence Révai. “Funds earmarked for subsidized child catering have grown from HUF 29 billion to HUF 79 bln in the past years, which will ensure that kitchens can work with better quality material.”

Classic and Modern

Another cooking contest, “Meal of Hungary” will debut this year. Its slogan

that enables students to get hands-on training in a cutting-edge kitchen environment.

“Part of BGE’s strategy is to promote responsible gastronomy,” stressed Dr. Andrea Lugasi, dean of the business school’s Faculty of Commerce, Catering and Tourism. “In this effort, we aim to act as a center of excellence that disseminates best practice on sustainability, waste management, minimization of food waste, energy consumption and eco footprints by relying on our professional network.”

Both competitions are expected to give a large-scale boost to Hungarian gastronomy, as well as to the concept of healthy life style and balanced nutrition. “I am confident that the new culinary compositions will be integrated into domestic gastronomy, thus helping preserve our identity,” added István Asztalos, the chairman of ÉTREND.

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Budapest Business Journal | January 26 – February 8, 2018

Furmint February Night at the Museum The 2018 tasting calendar begins in earnest on February 1 with the Grand Tasting event of “Furmint February” as a relatively dry January, at least in terms of wine events, is left firmly behind.

ROBERT SMYTH

This year’s huge homage to Hungary’s flagship grape which is once again being held at the Magyar Mezőgazdasági Múzeum (the Hungarian Agricultural Museum), and coincides with the second so-called “International Furmint Day”, which will likely lead to a frenzy of Furmint social media posts, using the #furmintday hashtag.

“Furmint is a special, exciting and really likeable variety. Its elegance and complexity are perhaps comparable only to the nicest Chardonnays of Burgundy and Rieslings of Germany,” states the www.furmintday.com website. It was founded by Dániel Kézdy, author of “Tokaj: People and Vineyards”.

While, if truth be told, there are plethora white wine grapes that make amazing wines around the world (just look at some of the numerous Italian varieties that are starting to become more widely appreciated), Furmint is certainly attracting attention on the international stage. Indeed, the United Kingdom’s Tim Atkin MW (Master of Wine) describes Furmint as “one of the world’s great unsung grape varieties”.

Nevertheless, Kezdy keeps Furmint real and he told me a couple of years back

that the grape should first consolidate its reputation on the domestic market, before pushing ahead with making a name internationally. In the meantime, Furmint has certainly gained a strong foothold domestically and initiatives like FurmintUSA are confidently knocking on the international door.

When Furmint is good it can be very good indeed, and it can be an awesome articulator of terroir, as it does capture the nuances of different places of growth with uncanny ability.

While Furmint’s pedigree in making Tokaji Aszú and other sweet lateharvest wines dates back centuries and is unquestionable, I personally remained underwhelmed for a long time by its ability to make killer dry wine, and I’m still not convinced of its ability to age well. It remains to be seen how capable dry Furmints are of ageing nicely, given the fact that the high-end stuff is very new. After a few years, some of them go a

bit petroly, as Riesling does, but without retaining the crispy fruit of the German Alsatian grape as it ages.

Go Lightly With the Oak

Furthermore, for a long time, even wines from some of the biggest Tokaj names were all too often smothered in too much oak to allow the characteristics of the grape or the place of growth to come through. Instead, all we often got was a buttery creaminess that didn’t suitably distinguish Furmint from the likes of a big fat Chardonnay.

Then, the high alcohol and searing acidity could finish your palate off.

However, real progress is being made as many Hungarian winemakers have worked out that less is more when it comes to the use of oak and held back on harvesting too late and squeezing every last bit of extract out the grapes.

When Furmint is good it can be very good indeed, and it can be an awesome articulator of terroir, as it does capture the nuances of different places of growth with uncanny ability.

From the Tokaj wine region itself, it is also fascinating to taste the contrast between the more fruit-forward and round wines from the loess soils on and around Tokaj Hill with the edgier, more fiery wines from the volcanic soils around Mád. Dry Furmint is still an emerging style and let us not forget that it’s only in this century that this late-

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ripening, thin-skinned white grape has been making dry wines of serious breeding in Tokaj as producers, led by István Szepsy and Oremus, sought to find a dry alternative as global demand for the sweet stuff diminished.

While Furmint is often on the more neutral side, aromatically speaking, its typical note of quince is for me distinctive and exciting. Every year, more grape growers and winemakers are getting on the seemingly unstoppable dry Furmint train and planting the grape up and down the land, way beyond its traditional strongholds of Tokaj and Somló.

It is also being reintroduced it where it once thrived before the phylloxera louse devastated vineyards in the late 19th century. Furmint is now re-establishing itself around Lake Balaton, especially on and around the volcanic basalt, limestone and marl soils of the northern shore, but one of my recent favorites come from the loess of the southern shores. Ottó Legli’s spontaneously fermented Furmint 2015 is a real bargain for HUF 2,790 from Bortársaság and captures the grape’s varietal character in all its ripe, slightly tropical fruit glory, yet it retains fresh acidity. It was aged in used 500-liter barrels for seven months and the oak use is spot on.

The Grand Tasting of Furmint February starts at 4 p.m. and ends at 9 p.m. on February 1. It pays to get there early, before the crowds build and the alcohol kicks in, and also because some of the leading winemakers tend to run out of wine well before closing time. Tickets cost HUF 9,900 in advance from: https://tixa.hu/9furmint-februar-nagy-kostolo. The event always rocks the museum to the rafters and no information is currently available about tickets being available on the night. The tasting will feature mainly dry wines, but there will also be some sweets and sparklers. Furmint’s high acidity and relatively neutral aromas lend itself well to sparkling winemaking by the traditional method, and the results are increasingly encouraging. In all, almost 100 wineries will be pouring at least 150 wines.

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