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HUNGARY’S PRACTICAL BUSINESS BI-WEEKLY SINCE 1992 | WWW.BBJ.HU

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BUSINESS JOURNAL BUDAPEST

VOL. 25. NUMBER 2

JANUARY 27 – FEBRUARY 9, 2017

.hu

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Budapest Business

27 – february Journal | january

9, 2017

port ial Re Spec ounting Taxation & Acc

ent? 10 to Parental Employm 12 ged – a Boost ld Cafeteria Rearran Raising its Thresho 18 Expanded by Flexible Friend KATA Tax System Tax Expert’s International Hungary: the

A raft of new laws came into uar y 1. Jan effect from impact y How will the the market?

SPECIAL REPORT

Taxation & Accounting NEWS

Record-low Base Rate to Remain for 2017 After three years of practically nonexistant inflation, Hungary will see a noticeable rise in consumer prices in 2017, but the MNB is not expected to change its monetary policy this year.3 BUSINESS

BBJ Expat CEO of the Year Award With the third annual Budapest Business Journal Expat CEO of the Year Gala just around the corner, the jury has announced its shortlist of five candidates for the 2017 award.6 SOCIALITE

Vegetarian Hungary David Holzer explores the challenges of being a vegetarian in largely carnivorous Hungary, and finds life is gradually becoming easier for those who chose to “pass” on the meat.29

“Big News”

From Hungary

RT EPO

EY’s New Yorkbased international tax partner Miklós Sánta believes Hungary’s decision to slash its corporate tax rate to a flat 9% has launched a “race to the bottom”, but says the country will benefit. 18 R IAL C E P S

Accounting & Payroll across Europe

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professionals in CEE bluechip clients industries countries 2017.01.23. 0:11:15

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Budapest Business Journal | january 27 – february 9, 2017

BBJ

THE EDITOR SAYS

EDITOR-IN-CHIEF: Robin Marshall NEWS EDITOR: Christian Keszthelyi EDITORIAL STAFF: Zsófia Czifra, David Holzer,

Levente Hörömpöli-Tóth, Gary J. Morrell, Claudia Patricolo, Rob Smyth, Ágnes Vinkovits. LISTS: BBJ Research (research@bbj.hu) NEWS AND PRESS RELEASES:

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News Services Hungary A.M., Energy Today, Regional Today 1 year, from HUF 179,000+VAT 6 months, from HUF 104,900+VAT 3 months, from HUF 58,900+VAT Book of Lists 2015-2016: HUF 19,120+VAT DigiBOL HUF 39,900+VAT Call +36 1 398-0344 or email circulation@bbj.hu What We Stand For: The Budapest Business Journal aspires to be the most trusted newspaper in Hungary. We believe that managers should work on behalf of their shareholders. We believe that among the most important contributions a government can make to society is improving the business and investment climate so that its citizens may realize their full potential.

I

t was a somber start to the week, even by the standards of a bitterly cold and fog-shrouded Monday morning. As I took my two eldest children to school, I could not but notice the black flag flying above the entrance. It was a stark reminder both that this was a day of national mourning, and that the background to that fiery fatal coach crash outside Verona was a returning school ski trip.

It was also a sobering reminder that, whatever your troubles, supposed or otherwise, there are always people worse off than you. For all the handwringing of those horrified by what President Trump’s inauguration on Friday might mean for the future, for all the anxiety being felt by students and parents across Hungary as children sat their gimnázium (grammar school) entrance exams on Saturday, here was a real tragedy, brutal and cold and clinical. Parenthood changes you in many different ways. You would hope the majority of us would respond to such a tragedy with simple human empathy. With three children of my own, I also find it impossible not to wonder what the parents are going through. All of us want to give our children those first glimpses of independence, to let them stretch themselves, experience new countries, and different cultures. This was a ski trip, so you might possibly have entertained the the thought that your child could break an arm or a leg, but not this. Never this. And right now there will be grieving parents in Budapest blaming themselves for letting their children go on that trip.

Yet, if life has shown me anything in my near 50 years, it is that there is nothing to be gained from second-guessing your decisions. My own parents taught me that, as I watched them raising my late handicapped younger brother. They weren’t much for mottos or philosophy, but if they had been their world view could have been summarized thus: “These are the cards I have been dealt, and nothing I say or do can change that.” Their calm, commonsense approach was to get on with life. In the end, there is nothing else you can sensibly do.

But, as ever with tragedies such as this, there are stories to lift our hearts, even from these depths, stories that show us the better angels we all hope we carry within us. Like the student with the presence of mind to grab the emergency hammer and break the window glass, allowing others to escape. Or the teacher, who lost two children in the tragedy, but went back into the bus several times to pull others free, suffering bad burns in the process. Or the passerby who stopped his car to help, and then stayed on the scene for more than an hour translating, because although the Hungarians spoke good English, the Italian emergency services did not. It goes without saying that everyone at the Budapest Business Journal hopes for a speedy recovery for those who survived, and sends their condolences to the families and friends of the victims.

Fortepan.hu/Márton Kurucz

MTI/Balázs Mohai

The Budapest Business Journal, HU ISSN 1216-7304, is published bi-weekly on Friday, registration No. 0109069462. It is distributed by HungaroPress. Reproduction or use without permission of editorial or graphic content in any manner is prohibited. ©2017 BUSINESS MEDIA SERVICES LLC with all rights reserved.

A SOBERING Reality Check

THEN & NOW

BBJ-PARTNERS

The building of the Hungarian Parliament become a ghostly silhouette through the heavy smog that the capital, along with many other cities in the country, has been experiencing in the past few days. A smog alert was triggered on January 22, restricting entry to the capital for some older, more polluting vehicles. But it is far from a new phenomenon, as can be seen in the picture on the left from 1943, with Parliament visible (just about) through the fog from the Buda side, standing at Margaret Bridge.

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Record-low Base Rate to Remain for Whole Year

After three years of practically nonexistant inflation, Hungary will see a noticeable rise in consumer prices in 2017. But, despite the increasing inflationary pressure, the National Bank of Hungary (MNB) is not expected to change its monetary policy throughout this year. ZSÓFIA CZIFRA

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ungary’s macroeconomics calendar wasn’t exactly full in the second half of January. One of the most significant pieces of data was the consumer price index for last December, and the Central Statistical Office (KSH) also published inflation figures for the full year (2016) on the very same day mid-January. According to the KSH, consumer prices were 1.8% up on average in December from a year earlier. Food prices rose by 1.3% in the last month of 2016 on a year-on-year basis: within the group, sugar prices grew the most, by 16.3%, prices of seasonal food items were up 3.6%, while milk prices grew by 2.6%. During the period, pork and poultry meat prices decreased, by

After the meeting, the MPC repeated its earlier statement about keeping the base rate on hold “for an extended period”, while remaining prepared to ease monetary conditions with unconventional tools if necessary.

8.5% and 3.6%, respectively. A higherthan-average price rise of 3.5% was recorded for other goods, such as pharmaceutical products, motor fuels, household products and recreational goods, and, within this, consumers paid 6.8% more for motor fuels. The prices of electricity, gas and other fuels remained unchanged. In line with expectations, consumer prices rose by 0.4% on average in the full year of 2016 compared to 2015. Food prices increased by 0.7% last year, with the highest price rise (2.3%), recorded for alcoholic beverages and tobacco. The prices of services rose by 1.5%, those of consumer durables by 0.5% and the prices of clothing and footwear by 0.4% on average. Consumers paid 2.2% less for other goods, and the prices of electricity, gas and other fuels were reduced by 0.1%. The last year when inflation was in the positive territory was 2013, when prices were up 1.7% from the previous year. The fact that core inflation in December increased to 1.7% clearly shows inflationary pressure, however, this is way below the 3% medium-term target, Takarékbank analyst Gergely Suppan comments in a note. Increasing fuel prices caused the month-on month 0.4% rise in the index, he emphasizes. At the beginning of this year, several

After the meeting, the MPC repeated its earlier statement about keeping the base rate on hold “for an extended period”, while remaining prepared to ease monetary conditions with unconventional tools if necessary. Most analysts polled by Hungary’s news agency MTI said they did not expect the base rate to change until mid-to-late 2018. Erste Bank chief analyst Gergely Ürmössy thinks the MNB could ease monetary conditions further, believing interbank rates could fall further. He said he expected the three-month Budapest interbank (BUBOR) rate to fall below the current 0.27%, adding that the fall in nominal interest rates could lead to a rise in inflation. Ürmössy also projected an average inflation rate of 2.3% for 2017. CIB Bank analyst Sándor Jobbágy said he expected the central bank to leave the key rate unchanged until the end of the year. He also said the use of non-conventional instruments is possible, although the MNB now has less room for maneuver on this area. The MNB faces a double challenge, says Mónika Kiss, head analyst with Equilor Investment. On the one hand, it has to keep the base rate record low, on the other, it has to pay attention to the increasing inflationary pressure and the consequences deriving from the rising key rate of the U.S. Fed. According to Kiss, the central bank will not, therefore, modify the base rate until the end of the year, so, while inflation awakens, the rate level will remain at its record low, and the MNB will only start a tightening cycle in 2018.

contradictory factors affect inflation: while the VAT reduction for certain goods – fresh milk, egg, poultry, internet, hospitality – pushes the index down, the base effect, together with further increasing fuel prices, livening domestic demand and higher wages, all push it up, Suppan explains, adding that higher wages are somewhat balanced with lower wage costs. As of January, the consumer price index could rise above 2%, and could even be as high as 2.7-3% by March, due to the base effects of low fuel prices in February-March 2016. As fuel prices started to increase in April and May last year, inflation will slow down to around 2% this spring, Suppan says. He expects an annual inflation rate of 2.3% for 2017, and the index could get close to the 3% target by early 2018. Therefore, the National Bank of Hungary might deploy further nonconventional tools, but no tightening cycle is expected to start any time soon, Suppan concludes. Indeed, Hungary’s rate setters kept the base rate unchanged at 0.9% at their latest meeting. The decision of the Monetary Policy Council of the MNB was in line with analysts’ expectations. The council also left the interest rate corridor unchanged, with the overnight collateralized loan rate at 0.9% and the O/N central bank deposit rate at -0.05%.

Consumer prices 2016: up 0.4% overall +

0.7%

Food

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2.3%

Alcohol & tobacco

1.5%

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0.5%

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Consumer durables

0.4%

+

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-

2.2%

Other goods

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0.1%

Elec., gas & fuels

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Budapest Business Journal | january 27 – february 9, 2017

Where Academia and Family Meet “Our results are consistently higher than the U.K. average and our students go on to attend prestigious universities around the globe. To be precise, 32% of our International General Certificates of Secondary Education (IGCSEs) were at ‘A’ or ‘A*’ last year.”

When the children of the Britannica International School, Budapest returned to lessons on January 3, they were not just starting a new calendar year, but also a new chapter. For also starting on that day was the new principal, Neil McGarry.

and between teachers and parents,” he says. The academic results are good too. “Our results are consistently higher than the U.K. average and our students go on to attend prestigious universities around the globe. To be precise, 32% of our International General Certificates of Secondary Education (IGCSEs) in 2016 were at ‘A’ or ‘A*’ last year.”

Neil McGarry, principal.

ROBIN MARSHALL

“It made for an interesting Christmas, traveling across Europe in freezing weather conditions,” says McGarry,

45. “It is somewhat unusual to start in January [rather than September, at the start of the academic year], but it also

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Britannica International School Bringing the Best of British Education to Budapest

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offers different opportunities. ‘New Year, New Beginnings’ has been the theme of some of my assemblies.” The British-born principal came to Budapest from Guernsey, making the contrast between a Channel Island with 27 beaches and landlocked Hungary quite marked, but he says the transition to a country he had never been to before has been smooth.

First Visit nationalities

“My first visit was for the interview in June. It has been a pleasant surprise; Budapest is an incredible city. I grew up just north of London, so I am familiar with city life and discovering Budapest has been a fascinating experience. There is so much to see and do with the family at weekends, student and public transport is easy and convenient to use.” Having moved with his wife and son (who has joined Year 6 at the school), the familiarity and comfort of a new home is vitally important, but so is the workplace. Britannica takes children from 5-18, follows the British national curriculum and is fully accredited by the Council of British International Schools. The school roll has been rising and this year saw a double class entry into Year 7, which is the start of the secondary phase. That is now true of all years from Year 1 through to Year 7. The school expects this double entry to continue throughout the secondary section.

in 1 campus

Primary Open Day, 9th February 2017 Secondary Open Day, 16th February 2017 Come and see the School at work!

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Information and registration: Britannica International School www.britannicaschool.hu/Open-Days 1121 Budapest, Kakukk u. 1-3. Phone: (+36 1) 466-9794

Family Atmosphere With 49 nationalities on the roll, McGarry says that what really impressed him when he visited was the strong family atmosphere. “There seems to be genuine respect among students, and between pupils and staff

Compelling Mix The combination of academic results and family atmosphere make for a compelling mix, the principal says. “The design of the school and its location up in the hills are really special, but what sets us apart, I’d say, is the high standard of academia and the strong family and community feel and atmosphere. There is a genuine

49

Nationalities

1993 Established

IN 1 CAMPUS three-way partnership between the school, the pupils and the parents.” Britannica is part of Orbital Education Ltd., a U.K.-based group of schools that offers its own network of support. In the future, says McGarry, “Children will be able to connect through a ‘virtual learning environment’, while staff will share best practices among nine other schools across the world. It is a development that we are very excited about”. McGarry sums up of thethe challenge he 5 businesses nominated faces as maintaining the growth that the generated school has achieved over the past six years. “We have a significant waiting list. 1 , 5 2 3and 5 3 , 9 3school We are aFvery 3 , 5good , 0 0so many U 0 here H parents want their children to come that catering for them all is difficult, but we will do whatever is required to meet COMBINED AFTER TAX PROFITparents IN 2015 and the needs of our students, wider school community.”

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Coca-Cola Hungary signs dual education agreement with universities

Coca-Cola HBC Hungary has signed a dual education agreement with four Hungarian universities — Szent István University, the University of Szeged, the University of Pannonia and Óbuda University — according to a press statement sent to the Budapest Business Journal on January 20. Under the agreement, students will be able to gain degrees that are more valuable than others, the company says. This year, the program will make it possible for more than 30 students to gain working experience. “The most important condition of competitiveness today is clearly a welltrained workforce, therefore we expect dual training to spread in the case of universities, as well as companies,” said Minas Agelidis, general manager of Coca-Cola HBC Hungary. Coca-Cola HBC Hungary is part of the Coca-Cola HBC Group, responsible for 28 countries serving 593 million consumers, and exporting to 24 countries in the region. Currently the subsidiary directly employs 1,100 people in Hungary.

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Audi Hungaria’s output falls in 2016 The production of car manufacturer Audi Hungaria was lower in 2016 than 2015, the company told Hungarian news agency MTI on January 18, with 95,882 fewer engines and 37,231 fewer vehicles. The Hungarian plant of the German luxury carmaker turned out a total of 1,926,000 engines, including 1,461,000 four-cylinder engines, 9,113 fivecylinder engines, 418,207 sixcylinder engines, and a combined 37,700 eight and ten-cylinder engines, according to MTI. A total of 122,975 cars rolled out of the plant in 2016. That included 21,562 Audi TT Coupé models, 5,324 TT Roadsters, 81,060 A3 Limousines, and 15,029 A3 Cabriolets, the news agency reported. The number of Audi employees increased by 220 to 11,631 last year, compared to the preceding year. However, 850 workers have been temporarily moved from its Hungarian base while it prepares to switch over to production of the new Q3 model. From December, 550 workers were moved to Audiʼs vehicle plant in nearby Bratislava, Slovakia, about an hour away by car. The other 300 stayed at the base in Győr, but were moved to engine production, according to MTI.

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Budapest Business Journal | january 27 – february 9, 2017

Nationalities

33%

25%

25%

CEO1993 of the Year Shortlist Announced

in 1 campus

With the third annual Budapest Business Journal Expat CEO of the Year Gala just around the corner, the jury has announced its shortlist of candidates. BBJ STAFF

T

21%

he BBJ founded the award back in 2015 with the aim of rewarding the efforts of expat CEOs working and living in Hungary, who have contributed most to the development of the Hungarian economy and raising the country’s international recognition through their professionalism and dedicated work. “The BBJ is Hungary’s only Englishlanguage economic bi-weekly, and has always played an important role in providing information for foreign CEOs working and living in Hungary; that is why we decided to found an award and recognize their efforts annually,” said Balázs Román, the CEO of Absolut Media Zrt., publishers of the newspaper. Since the beginning, the event has been run in partnership with the Hungarian Investment Promotion Agency (HIPA), which presents its own “Local Partnership” award at the gala, given in recognition of the outstanding use of Hungarian suppliers. The tricky task of picking the winner goes to our regular jury, which, since the launch, has been comprised of Dr. László Szabó, Deputy Ministry of Foreign Affairs and Trade; Írisz Lippai-Nagy, CEO of the American Chamber of Commerce in Hungary; Dale A. Martin, President of the German-Hungarian Chamber of Industry and Commerce, and President and CEO of Siemens Hungary; and Balázs Román. By tradition, the fifth seat on the jury is taken by the previous year’s winner, meaning Jost Ernst Lammers, CEO of Budapest Airport Zrt., gets to see the process from the other side. This year’s winner will be revealed at the invitation only gala at the Corinthia Hotel Budapest on the evening of February 10. To keep the

STANDARD CIT

20%

200.000 20%

12.5%

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IN 1 CAMPUS

suspense going, the decision is made immediately before the gala; not even editor-in-chief Robin Marshall, who has hosted the event since its launch, knows the name of the winner until it is pulled from the envelope.

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COMBINED AFTER TAX PROFIT IN 2015

BBJ Expat CEO of the Year Shortlist Joerg Bauer President GE Hungary Managing Director GE Hungary Kft. Bauer is the President of GE Hungary and has been based in Budapest since October 1, 2013. His says his goal is to build on GE’s key partnerships in Hungary and the region to drive common sustainable growth. Today, GE in Hungary has more than 10,000 employees spread across 12 plants, five R&D and engineering centers and one of GE’s five Global Operations Centers. Prior to his current role, Bauer, a German national, was CFO for GE Healthcare in CEE. He previously worked with Audi and Mettler-Toledo, partly also based in Hungary. Bauer also serves as the president of the Board of Trustees of the Sports University in Budapest. He also co-leads the Innovation Task Force of the Hungarian American Chamber of Commerce and is one of the two vice presidents of the Hungarian Association of International Companies. Stephan Interthal General Manager Kempinski Hotel Corvinus Budapest On September 1, 2014 Stephan Interthal returned to Budapest, where he held the position of general manager from 1997 to 2004, during which time he implemented a comprehensive refurbishment project at the Corvinus. Now he has orchestrated ambitious renovation works to overhaul all of

The Netherlands

the rooms and suites, the spa and the restaurant. Before his return, Interthal was in charge of Hotel Baltschug Kempinski Moscow from July 2013, where he oversaw the final stages of a EUR 20 million renovation project. Prior to Moscow, he managed the Kempinski’s flagship property in China. Interthal is a graduate of the Cornell University and the recipient of a European Business MBA from Reims Management School in 2000. Throughout his career, he has consistently advocated for providing customers with impeccable service that exceeds expectations. Jesper Hassellund Mikkelsen Senior Vice President European Moulding and DUPLO Head of LEGO Moulding Denmark General manager LEGO Manufacturing Hungary Jesper Hassellund Mikkelsen has a BSc in finance and accounting and a MSc in International Marketing. He joined the LEGO Group in 2002 and has worked primarily in the finance operation and manufacturing fields. Since 2012 he has been head of European Moulding & DUPLO, and as senior vice president a member of Lego Corporate management. From the time he joined LEGO in 2002 until 2011 he was head of finance operation and vice president. Previously he worked as an expat from 1996-2000 when he was finance manager at Danfoss Mexico, and from 2000-2001 he was a group controller at Royal Scandinavia A/S. Hassellund Mikkelsen was born in 1969 and lives in Budapest with his wife and their two children. Marc de Bastos Eckstein Executive Director ThyssenKrupp Presta Hungary Kft. Born in Rio de Janeiro, the 41-year-old Marc de Bastos Eckstein is half Brazilian and half German. At the age of 12 he moved back to Germany, and graduated from the University of Giessen with a degree in economics. In 2012 he earned an MBA from the renowned ESCP Europe Business School in Paris. In 2001 he joined ThyssenKrupp, having previously worked for Accenture and KPMG.

9%

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392 studentExpat BBJ

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In 2007, he moved to Hungary as the head of ThyssenKrupp Presta Hungary, but for seven years was also involved in parallel in the management of one of the German units, and so spent half the week in Stuttgart and the other half in Budapest. He has focused exclusively on Hungary since 2014. De Bastos Eckstein is married and has two children, aged eight and five. Rick P. Enders General manager Budapest Marriott Hotel & Marriott Executive Apartments Enders has been general manager of the Marriott and Millennium Court since March 2014. He is responsible for total hotel operations at two properties, providing strategic direction and guidance to the executive team. He is charged with improving and maintaining operational performance related to revenues, operating profit, guest satisfaction and market share. He is a board member of the Netherlands-Hungarian Chamber of Commerce. The Dutch national says great memories are born out of exceptional experiences, and has a passion to create those, with his teams, by being creative and staying curious. He has experience across three continents and nine different countries, having previously been general manager at a number of Marriott hotels in Prague, and director of operations in Warsaw. He began his career with Marriott International as a sous chef in 1988.

PREVIOUS WINNERS BBJ Expat CEO of the Year: 2016: Jost Ernst Lammers, CEO of Budapest Airport Zrt. 2015: Javier González Pareja, Then CEO of Bosch Magyarország.

HIPA Local Partnership Award: 2016: Naoyuki Takeuchi, Then CEO of Magyar Suzuki Zrt. 2015: Kersten Bachmann, CEO of TAKATA Safety Systems Hungary Kft.

SPONSORS LIST

The BBJ Expat CEO of the Year award and gala is made possible with the help of the following sponsors. We are grateful for their support.

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Budapest Business Journal | january 27 – february 9, 2017

Special Report Taxation & Accounting

Cafeteria Rearranged – a Boost to Parental Employment? 10 KATA Tax System Expanded by Raising its Threshold 12 Hungary: the International Tax Expert’s Flexible Friend18

A raft of new laws came into effect from January 1. How will they impact the market? BBJ_2502_special_report.indd 7

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Budapest Business Journal | january 27 – february 9, 2017

Market Talk: Accounting and Tax Consulting Back on the Path of Growth The hard times are undoubtedly over in the tax consultant and accounting sector. Firms see a widening market with positive local trends. Yet, a more customer-friendly tax authority could give even more of a boost

ÁGNES VINKOVITS

As tax consulting and accounting companies have a good insight to the different fields of economy, their experiences and prospects are usually decent indicators of the country’s present state. And right now, both fields show optimism. “We can definitely feel the end of the crisis,” Dr. Roland Felkai, managing director of audit, legal and conulting firm Rödl & Partner told the Budapest Business Journal, commenting that not only are there more new companies established, but existing clients are showing signs of growth. Tax consulting company WTS Klient also expanded its revenues as well as the number of its clients, “due to a rise in the international and domestic economies”. The international presence is becoming stronger, too. Accounting and consulting company Colling’s head, Andrea

András Szalai, Process Solutions

Andrea Butkovics, Colling

Andrea Kuntner, VGD Hungary

Tamás Gányi, tax partner of WTS points out […] that the tax authority’s 2017 initiative to draw attention to mistakes and the possibility of self-checks is widely welcomed. “Such gestures are often more effective than the threat of a tax inspection,” he says.

Dr. Roland Felkai, Rödl & Partner

Tamás Gányi, WTS Klient

Butkovics reports that “foreign investors have returned” to the country. Tax and accounting firm VGD Hungary expects a boost both in the number of newly established companies and non-resident VAT-registered businesses. However, the reduction of the corporate income tax (CIT) rate to 9% is not expected to attract a considerable amount of foreign businesses. As CIT had already been competitive, the tax cut really affects only the bigger companies with annual revenues of more than HUF 500 million, as smaller businesses already paid only 10%. At the same time, the local business tax burdens continue to be relatively high.

More Demanding When it comes to client demands in the accounting sector, companies report a growing need for frequent reporting and integrated accounting solutions. Also, an increasing number of companies are asking for legal support or complex preestablishment solutions to gain a full picture of the local opportunities. Complex advisory is another trend in taxation. According to VGD Hungary tax partner Andrea Kuntner, clients ever more often want coherent advisory support in their strategic decisions, meaning that various professional fields from taxation and law to HR

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have to be covered at the same time. The widening market necessarily means growing workforce demands, too. “The labor shortage is an issue,” says Butkovics of Colling, adding that it is often very difficult to find good professionals in time. Highly qualified colleagues, especially those with good language skills, can pick and choose from several vacancies at big multinationals, while they might be also tempted to try themselves abroad.

New Habits Companies were allowed to follow International Financial Reporting Standards (IFRS) for the first time in 2016 and while it is currently obligatory only for companies that are present on EU stock exchanges, it is hoped the new model will lead to a cut in bureaucracy by harmonizing international financial reporting processes. Still, a wider implementation of the international standards seems to be a longer process in Hungary. While clients show some curiousity about the introduction of IFRS, most are only considering the short-term pros and cons of adopting it in terms of work-efficiency and possible tax disadvantages. At the moment, even big German companies are delaying preparing their entire Hungarian financial report according to IFRS standards. Taxpayer classification also kicked off a year ago. The first year of the system, which provides advantages and disadvantages depending on the reliability of the taxpayer, was accepted with relative satisfaction by both

accounting and tax consultant firms and their clients. WTS Klient says it is happy that the “reliable” classification was extended to those who previously had been fined for minor tax penalties, but it expects further fine-tuning of the system. Other market players also agree with the conditions of classification but would furtherly ease the terms of reliability. At the same time, according to VGD Hungary, some clients resent that tax authority NAV often initiates collection on due date, which is hardly beyond the deadline, and could easily push the taxpayer into the risky category.

Cooperative Attitude A generally more cooperative attitude from NAV would be appreciated anyway. Although Hungarian tax paying moral (the general willingness to pay taxes) is reported to be on the rise, further clarity and simplification can always help. Besides the hope for improvement in both the quality and predictability of legislation, head of accounting company Process Solutions András Szalai suggests that NAV, similarly to other authorities, makes a bigger effort to keep people informed. WTS Hungary agrees: the complexity of tax laws might result in missed deadlines and payments, it says. In this regard, “an improvement of NAV’s informing practices plays an important role”, Tamás Gányi, tax partner of WTS points out, adding that the tax authority’s 2017 initiative to draw attention to mistakes in advance and the possibility of self-checks is widely welcomed. “Such gestures are often more effective than the threat of a tax inspection,” he says.

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EXPERT OPINION

New Advertising Tax Rules Will Give Many a Headache: Important not Only for Media Companies Judit Jancsa-Pék Tax Advisor | Partner LeitnerLeitner

As of this year, taxpayers “NAV is converting itself into can ask the national an authority with a servicetax authority (NAV) to providing mindset.” fill their tax-reports for them for free – an option second-degree equation in their head, then write the solution on a simple NAV and the government and sheet; it is impossible unless you are a has been busy promoting genius.” lately. This move Different Tack seemingly goes against a Now NAV is taking a different tack; it is system introduced not so prompting people to let it do the mathfor them. “NAV is converting long ago, which aimed at reporting itself into an authority with a serviceproviding mindset,” said Titusz Fekete, simplifying the process manager at RSM Hungary Adótanácsadó to convince more to take és Pénzügyi Szolgáltató Zrt. People who have an “Ügyfélkapu” (a up self-reporting. “customer gateway” for dealing with BBJ STAFF

If there is anything more painful than paying taxes, it is the form filling required for reporting them. Not only do you allow the tax authorities to have a look at your finances, something most people have a natural aversion to, but you also need to deal with complex fact sheets and fill them out without error. It is not by chance the government decided to ease this burden and introduced a simplified tax-sheet in 2011. Dubbed the beer mat tax declaration, as it was so simple/short that it could fit the size of a beermat, the new self-reporting method has not caught on as expected. The simplified tax return – including only three pieces of data – worked well for those who have income from only one source, said Péter Honyek, senior manager at PwC Hungary. People received a log of their income from their employer that they only had to copy to the tax report – plain sailing. But for those who had several sources of income and types of employment, the simplified sheet has actually made it more difficult to self-report – as they had to do the math themselves, and add up the simplified results, Honyek said. “It is like asking someone to solve a

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official documents electronically), or register at one of the brick and mortar NAV offices or with their municipality, will no longer have to deal with the intricacies of self-reporting. NAV, too, can test how accurate its new system is. (NAV will use all the data available about the tax-payers’ income.) Such a change requires a massive IT background, which in turn required some serious investment on NAV’s part, but at the end of the day, the new system could be a win-win for both, Fekete said. According to the recent changes, the tax authority will send pre-filled tax returns to those individuals who request it up to March 15. Originally, the state calculated that around three million people would use this opportunity, but that may turn out way too optimistic. Since meeting a (tax-related) deadline has never been a Hungarian strong suit, experts asked by the Budapest Business Journal believe that the figure will be some considerable way short of that. “One million, if we are optimistic”, said Honyek. Most people will realize around May 10 that they are supposed to file a tax return, and by then it will be too late to request help from NAV, he added. “There is a reason why NAV set the March 15 deadline; it takes time to post thousands of letters.” This is why this option is not available any more.

As of January 1, foreign advertisers without a presence in Hungary should prepare for extremely strict sanctions for attempts to avoid Hungarian advertising taxation. The aim is that the threats are now so significant that it would not be worth the risk for anyone, says Judit Jancsa-Pék, partner and leading tax expert of LeitnerLeitner.

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oreign entities not registered in Hungary under any other tax type must register with the tax authority within 15 days of commencing their publishing activity in the country. They are also obliged to issue declarations to service recipients about their advertising tax status. In case of a failure to make this registration and /or declaration, from January 1 extreme sanctions may be levied. The marketing and advertising departments – even if located out of the country – of international groups present in Hungary may also fall victim to the persecution of the big internet service providers. Namely because, under the wording of the law, advertising tax obligations such as tax registration and issuance of a declaration are relevant for any company, irrespective of its place of establishment, that places an advertisement on the internet, predominantly in the Hungarian language or on websites written predominantly in Hungarian, or in any printed matter regardless of the publication language. However, should the tax base derived from the income and costs of the advertisement remain below HUF 100 million (approximately EUR 322,500), that results in no effective advertising tax payable, and also falls under an exemption from the tax return preparation and submission obligations.

Although it was probably not the intention of law to importune such international groups, the present wording does not exclude them and full security may only be achieved by the fulfilment of tax registration and issuance of declarations, even if there will not be an effective advertisement tax payment and tax return filing obligation. Considering the connected uncertainties, LeitnerLeitner asked the Hungarian finance ministry for a written opinion, says Jancsa-Pék, in order to find a solution for the problem that offers some comfort. In the meantime, however, the following sanctions shall be kept in mind: Upon failure to register for the tax, the tax authority notifies and calls on the non-Hungarian taxpayer to fulfil its liability, adding a default penalty of HUF 10 mln (approximately EUR 32,250). Then, the tax authority will repeat the notifications on each subsequent day, and triples the penalty to HUF 30 mln, 90 mln, 270 mln etc. (EUR 96,750 – EUR 290,250 – EUR 870,750, etc.). The sanctions for missing declarations are equally relevant for Hungarians and non-Hungarians, where the tax authority calls on the taxpayer to make up for the declaration within eight days. For noncompliance, a default penalty of HUF 500,000 will be levied at first. However, in case the notification is unsuccessful, repeated notifications parallel with the default penalty of as much as HUF 10 mln are levied, which amount will be tripled – just as above – in case of each unsuccessful notification. The above detailed sanctions are accumulated until the penalty reaches the maximum of HUF 1 billion (more than EUR 3 mln). Due to the fact that notifications will be issued daily, this will arise within a week. In addition to the above, the tax authority will apply a presumption and impose the advertising tax payable at the statutory amount, which will come to HUF 3 bln (more than EUR 9 mln). The taxpayer is obliged to rebut the presumption and prove the contrary within 30 days from receipt of the tax authority’s resolution. Therefore, Jancsa-Pék suggests the highest care be taken by all nonHungarian group companies that may be considered to perform taxable advertising activities within the scope of the advertising act.

LeitnerLeitner is one of the most influential tax consulting, accounting and auditing companies in Central Europe. The group supports its clients in 13 locations with 650 expert colleagues.

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NAV Offers to Fill in Tax Forms for you, Provided you ask Early

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Special Report

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Budapest Business Journal | january 27 – february 9, 2017

Cafeteria Rearranged – a Boost to Parental Employment?

A new incentive appeared on the market this year with the aim to direct at least some of the 240,000 jobless mothers back to the labor market. From 2017, companies can cover the expenses of daycare and kindergarten as part of their tax-free cafeteria structure. How is Hungary doing in reversing negative employment trends by consistently fine-tuning its child-care allowance system?

When it comes to parental employment, the availability of part-time jobs often plays as crucial a role as financial incentives. “Flexibility is the key,” Szilvia Magyar of HR company Hay Group told the Budapest Business Journal, adding that opportunities vary from sector to sector but, if the type of work allows it, most companies are open to

Together with some other changes to the benefit system, from January 1 employers may provide not only daycare services but also daycare supply and kindergarten services and supply to their employees as tax-free cafeteria elements. WTS-BBJ-124x158-201701:Layout 1

Cafeteria Changes (from January 1, 2017) Fringe benefits (generally subject to 34.51% tax burden. But if SZÉP exceeds the HUF 450,000 recreational limit, the part above the limit will be taxed at a rate of 49.98%. Cash above the HUF 100,000 limit is taxed at 93.24%)

HUF 100,000

annually Cash: up to payments to SZÉP (Széchenyi Recreational) card Cards: up to

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HUF 225,000

Maximum annually for accommodation services

HUF 150,000

Maximum annually for hospitality services

HUF 75,000

Maximum annually for the free time sub-account

part-time employment. According to data from Hungary’s Central Statistical Office (KSH), the number of women working parttime had almost doubled in 15 years, and reached up to 155,000 by 2015. At the same time, the number of women in full-time jobs rose by a much lower proportion, suggesting that part-time employment is taking up a bigger slice of the overall numbers. Apparently, the tendency is heading in a good direction, though chances depend on the scope of activity. Low-skilled jobs normally offer fewer part-time vacancies, leaving low-qualified parents in a more vulnerable position.

Rebalancing the trend

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WTS Hungary. The Bridge. www.wtshungary.com

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HUF 450,000

Sub-accounts of SZÉP (unchanged)

Flexibility is key

ÁGNES VINKOVITS

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Covering the cost of the food at the kindergarten, or contributing to the monthly fee of private day care – which, despite prices ranging between HUF 60,000-150,000 are unbrokenly popular in areas with insufficient public day care vacancies – is a welcome initiative. It has already appeared in companies’ cafeteria portfolios this year, and HR experts expect its popularity to increase quickly. From a wider perspective, the change is part of a central endeavor to help mothers return to work. The number of mothers staying at home with children below the age of three is increasing, and by 2016 it had reached 241,000. Coupled with this trend, the birth rate keeps slowly but steadily going down. In times of declining workforce and an estimated 50,000 permanently vacant jobs, thinking about new incentives sounds reasonable. However, the extended cafeteria solutions can, by definition, affect only those who have more opportunities anyway, and is not a tool that will tackle the problem at its roots.

In order to rebalance negative trends, the government has already rearranged the structure of family benefits in the past few years. The Hungarian financial support system for child-raising continues to be very generous in European terms, yet, by erasing or freezing some allowances while widening the opportunities for family tax breaks in 2011, the structure gives a stronger motivation for returning to work. But that said, it favors those already in a better position, given that they have a salary high enough to feel the difference of an easing of taxes, tax experts point out. The latest big attempt to push mothers back to work was the introduction of GYED Extra in 2014. This made students in higher education eligible for a fixed-sum GYED (an extended childcare benefit that a mother starts getting six months after delivery until the child turns two years old, calculated from the mother’s salary prior to childbirth). It also abolished the limitation on the number of hours worked while continuing to receive GYED, which, depending on the previous salary, could reach up to HUF 100,000 per month. Also, if a family has another child, while still receiving some allowances for their previous child, they can have both benefits. Before 2014, they could receive only one of the benefits. GYED Extra, however, has thus far failed

to change tendencies; the employment rate of mothers aged from 15-64 with children under the age of three somewhat increased in 2014, reaching 13.9%, but the next year it started to drop again and has continued going down since. Tax experts and accountants the BBJ spoke to argue that GYED Extra benefits those highly qualified mothers who would probably return to the labor market anyway. Not only are their salaries more tempting, but staying on maternity leave for too long could also damage their overall career. At the same time, low-qualified workers or those with a minimum wage might still be more interested in staying at home until major allowances run out as the child turns three.

Certain specified benefits (taxed at a rate of 49.98%) • • • • •

work-place meals school start support season tickets for local public transport cost of school system training monthly contributions to voluntary mutual pension funds, health funds and mutual funds paid by the employer amounts paid for targeted services as defined in the Act on Voluntary Mutual Insurance Funds

Tax-free benefits • • • • •

daycare services and supply, kindergarten services and supply cultural services health services provided by the employer non-refundable housing support, payment of loans mobility housing support

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Words With Meaning: How Plain Legal Language Could Help Hungary The vision of plain and understandable language used for official statements, instead of the overcomplicated officialese that is currently in place, has been circulating for a while in Hungary. But although some say a new simpler approach could even bring an economic boost, others fear it would damage legal clarity. ÁGNES VINKOVITS

The idea is not unique to Hungary, of course. In the United States, for example, the Plain Language Action and Information Network (PLAIN) is a group of federal employees from many different agencies and specialties who support the use of clear communication in government writing, and even have a

website (plainlanguage.gov) dedicated to that end. The Plain Writing Act of 2010 even requires federal agencies use to “clear Government communication that the public can understand and use”. Civilians who often need professional help to interpret a routine letter from the tax authority, or who are hardly able to make out the instructions for a new household appliance, would definitely welcome the reform of the language of official texts. The idea of more customer-friendly wording even enjoys the support of academic circles, and much of the tax and accounting market, too, yet not without some reservations.

Simplifying seems like a good deal on several levels. EU studies show that the bureaucratic burdens of Hungarian companies exceed 4% of GDP. Creating a more stable tax and legal regulatory environment, or putting statements in an easily understandable way, could save time for companies while also reducing the upkeep of customer services, as there would be much fewer confused clients.

Bureaucratic Loads While making legal texts concerning their clients clear is already part of the everyday

business for tax consultants and accounting firms, many would appreciate a strong central will to cut bureaucratic loads. Accounting company Process Solutions suggests that the National Tax and Customs Administration of Hungary (NAV) and other public bodies inform tax payers in a more frequent and practical way, not to mention that the quality and the predictability of legislation could also improve. Tax consultant and accounting firm WTS Klient also urges a more comprehensible manner of phrasing, which, if accompanied by calculable legislation, could lift the economy. However, according to tax advisor and accounting company VGD Hungary Kft., plainer language could damage the clarity of law. “Even with the current practice, we often need further clarification from the legislators,” VGD’s tax advisor and partner Andrea Kuntner told the Budapest Business Journal. Instead, she recommends that all laws have an understandable exposition attached, and adds that her firm would also welcome a stronger culture of entrepreneurs actually seeking professional help, rather than trying to solve things themselves. “By relying on professionals, everyone could effectively increase revenues through the things they are really good at.”

New Sectors Forced to Join the NAV Online Till System The use of cash registers directly connected to the tax authorities became mandatory for ten new sectors from January 1. Apparently, the tills increase the central budget’s VAT revenues, but are they also successful in recoloring more of the economy from grey to white? ÁGNES VINKOVITS

The new sectors – pharmacies, motor vehicle repair shops, retailers of motor vehicle spare parts, plastic surgeries, discos and ballrooms, clothes cleaners, physical trainers and masseurs, travel service providers (except village accommodation), taxi drivers and cash exchangers – have to buy and use the new tills, which are directly linked to the Hungarian tax authority (NAV). The

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government hopes the initiative will both enrich the state budget while also whitening the economy. The current system already has 230,000 online tills in sectors like retailers, household appliances repairers, and catering establishments, and increased the central budget’s VAT revenues by approximately HUF 150-200 billion in the year of its introduction in 2014, and has kept generating an extra of about HUF 100 bln annually since then. A remarkable proportion of the windfall, at least one-quarter, was provided by the retail sector in itself, according to the Ministry for National Economy (NGM). However, the increased VAT revenues from the retailers since 2014 may not only have come from the decrease of illegal trade, but is likely also to be a result of higher real wages and a slight rearrangement of consuming habits due to the government’s scheme to cut utility prices. Still, as the NGM told the Budapest Business Journal, tens of billions of forints are expected annually from the ten new fields of business involved.

huge number of their workers are rather likely to move abroad or, if they stay home, make their businesses completely illegal rather than pay for the machines. Taxi drivers show a somewhat more cooperative attitude. “This is an obligation we have acknowledged and are ready to meet,” Zoltán Metál, the head of National Taxi Association told the BBJ, suggesting that there could have been other solutions, too, in order to cleanse economy. “In Austria, if a sector does not bring the reasonably expected figures, the tax authority comes and asks how they could help,” Metál says. “Facing the risk of bankruptcy while working very hard can happen easily in Hungary,” he says, adding

that the Western approach of giving more personalized solutions instead of imposing obligations on overall sectors could also help Hungarian entrepreneurs stay on the market. In any case, the online till system does nothing to solve the main problem in the taxi sector, the so-called taxi hyenas. These drivers, charging extremely high fees, work fully in the dark as they not only avoid paying taxes but are not even certificated for this type of business activity. However, 2017 has brought something new for them, too. Control teams have started to travel around and make test purchases with the aim of tracking down the hyenas and applying Europe’s most strict sanctions.

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State aid The entrepreneurs are not left fully alone with the expenditure newly pressed on them. A HUF 50,000 state support, which covers about half of the price of the machine, was granted to those who bought and installed their registers before December 31, 2016. Also, the software of the cash tills is kept updated free of charge. Nonetheless, legal obligations are rarely received with great applause. The Massage Association has already announced that only about 10-15% of Hungary’s masseurs and masseuses are buying the online tills. Also, a

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Budapest Business Journal | january 27 – february 9, 2017

KATA Tax System Expanded by Raising its Threshold The number of small taxpayers subscribing to the fixed-rate tax for low tax-bracket enterprises, or KATA as it is known by its Hungarian initials, is expected to increase considerably due to recently introduced changes in the scheme.

“This is an extremely simple tax scheme, and the HUF 50,000 lump sum/month as a general rule is really favorable, compared to what self-employed entrepreneurs or small business would have to pay.” spur the growth of small businesses. This time around, however, it has more to do with politics, and with further whitening the sector. KATA contributes little to the budget – revenues from this tax totaled HUF 63 billion in the first 11 months of 2016 – which, compared to what large companies are due to pay, is negligible. So a more likely reason why the government has decided to raise the threshold is that it wants to focus more on the big players, experts suggest. Cracking down on sophisticated tax evaders requires a great deal of digital and human resources and, of course, money.

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Small taxpayers, businesses or entrepreneurs, named so after the modest revenues they make annually, will likely be welcoming the fact that, as of this January, the turnover threshold for KATA, a lump sum tax, will be doubled. The former HUF 6 million cap will rise to HUF 12 mln – although this upper amount will no longer be VAT-free. Until 2016, those whose annual revenue did not exceed HUF 6 mln paid HUF 50,000 every month. Should they have exceeded it, on the amount over this limit was liable to tax of 40%. From this year, the VAT-free limit is HUF 8 mln, and the amount free from the 40% tax goes up to HUF 12 mln only if the monthly HUF 50,000 is paid for a whole year. If someone joins KATA later, the base will be adjusted to the number of months they have been using it. “Over a yearly threshold of HUF 8 mln, businesses need to pay VAT as well, so most of them will try to remain under this amount”, Péter Honyek, senior manager for tax and legal services at PwC Hungary, tells the Budapest Business Journal. One major draw of KATA, beyond the lower tax burden, is its simplicity. Normal tax reports are very complex and can only be properly done with the help of an accountant, says Honyek. Using KATA, tax payers can deal with selfreporting even if they turnover is HUF 8 mln per year, he added. “This is an extremely simple tax scheme, and the HUF 50,000 lump sum/month as a general rule is really favorable, compared to what selfemployed entrepreneurs or small businesses would have to pay,” agreed Sándor Hegedüs, partner and head of tax department at RSM Hungary Adótanácsadó és Pénzügyi Szolgáltató Zrt. In fact, monthly payables would amount to nearly four times as much if paid under a normal scheme (see table). In the example above, the entrepreneur pays social contributions after an amount (HUF 241,500) that is 1.5 times higher than the guaranteed minimum wage, whereas KATA taxpayers are

BBJ_2502_special_report.indd 12

Favorable Scheme So rather than dividing its attention between two circles, it offers a favorable scheme to the group of people which generates small tax revenues, thus increasing the likelihood of many of those stepping out of the grey area. It is not unlikely that the changes are also related to the elections – with this relatively small step the government can please a certain circle, though not in great numbers. Some experts have warned that the modifications to KATA may result in some employers trying to change the status of their employees into entrepreneurs, but since the law includes clauses to prevent that, most employers will not run the risks of doing so, Hegedüs believes.

Péter Honyek, senior manager for tax and legal services at PwC Hungary only entitled to social security benefits equivalent to their earning HUF 90,000. This means those opting for normal taxation will end up receiving at least twice as much pension, sick leave, and maternal leave as those paying the KATA lump sum. By now, the number of tax payers using the KATA system is thought to total almost 150,000. As a result of the recent modification, the number of people that might join could be another 50,000-60,000. As previously, they will mainly come from the service industry: hair-dressers, taxi-drivers, lawyers at small law firms, and B-2-C businesses who operate with relatively small costs. Businesses with high operational costs such as restaurants or retailers would not benefit from switching to the system, Honyek said.

Politics and Legality Introduced in January 2013, when the recession was still in full swing, the measure was, at least in part, intended to

KATA taxation (HUF)

Normal taxation (HUF)

KATA

600,000

0

Local tax

50,000

140,000

Social contributions

0

536,130

Social tax

0

637,560

Tax on income from independent activity

0

434,700

Tax on profit

0

176,580

Tax on dividend

0

267,813

Healthcare tax on dividend

0

246,510

650,000

2,439,293

Together

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Budapest Business Journal | january 27 – february 9, 2017

VAT Changes on Takeouts a Tempest in a Teacup

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EXPERT OPINION

Why 9%?

CCHRISTIAN KESZTHELYI

From January 1, the calculation of the VAT rate to be applied to food and drink products sold at restaurants or by hospitality service providers undoubtedly became more complicated. Different VAT rates are to be applied if the order is consumed on the spot or taken away, if cereal can be found in the food, or whether milk is used in the drink, just to mention a few. Changes are hard to accept in general, and the market seemed initially to be in shock about how to keep up with the new regulations. “The regulations themselves are not complicated, but their understanding can take some time, as was especially experienced in the case of smaller hospitality service providers,” László Könnyid, vice president of the Hungarian Hotel and Restaurant Association (HHRA), tells the Budapest Business Journal. “Another difficulty that arose was that some cash register service providers issued software updates relatively late, right before the turn of the year, and business owners were met with difficulties in getting prepared for the changes.” But it seems restaurants and caterers have come to terms with the changed environment over the past three weeks, a fact helped by the National Tax and Customs Administration (NAV) publishing an FAQ sheet. “All in all, the system is truly complicated, and its

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fine-tuning is expected to take place this year, through the negotiations of professional organizations and the Ministry for National Economy. Based on the experiences of the past three weeks, it can be concluded, that not only computers have been able to adjust to the new system, but also the minds of the personnel involved,” Könnyid explains.

Benefiting the Market No direct changes are expected to shake the market as a result of the changes, though. Consumer prices are predicted to stay unchanged, as any surplus generated by lower VAT rates is expected to be invested into increased wages and improved equipment. The quality of the hospitality market should improve as a result.

“All in all, the system is truly complicated, and its fine-tuning is expected to take place this year, through the negotiations of professional organizations and the Ministry for National Economy. Based on the experiences of the past three weeks, it can be concluded, that not only computers have been able to adjust to the new system, but the minds of the personnel involved.” Additionally, the changes are now seen as likely to help all market players. “The recent steps clearly have been positively received by the market, as the labor shortage generating pressure to increase wages have been a burden for companies, and now they can gain some resources,” Könnyid believes. He adds that players in the sector are equally interested in boosting competitiveness, as demand for such has risen for both domestic and foreign tourists. Although after the new regulations came into effect, news reports suggested that IKEA had stopped take-away services at its Hungarian stores rather than have to deal with the complicated VAT calculations required, other market players are not expected to follow suit. “I do not believe that take-away services will be halted en masse, as in many of the cases, 20-30% of the traffic is generated this way,” Könnyid forecasts. He sees a likelihood that, in the case of some businesses, where take-aways contribute insignificant revenues, such services might be terminated, but it will not become a characteristic of the market.

Károly Radnai Tax partner, managing director OrienTax

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Like lightning out of the blue; this is how everyone felt about the big announcement last November that the corporate income tax rate would be reduced to 9% from January. The government cut a tax rate that did not really hurt many: small businesses just applied the lower, 10% rate; big ones, including multinationals, were often subject to the higher, 19% rate, but could either mitigate the effective tax with significant credits (by 70-80%), or simply paid it no heed as a below-the-line item. Being an external factor, the corporate tax is beyond the control of the management and plays a marginal or even a non-existent role in influencing share prices or management incentives. So what was the goal then? More revenues? Not really. Tax revenues are expected to drop by HUF 145 billion as a result. More jobs? Maybe, but the reduction of employer’s wage taxes would have been a more efficient way. Higher value added? Probably, but value added is much more driven by the availability (or non-availability) of other factors, such as infrastructure, skilled human resources, the degree of bureaucracy, etc. But before burying the measure completely, let us take a look at the other side. The announcement was extraordinary, indeed. The news about an EU and OECD member state (and not a sunny little island!) where all taxpayers shall pay such a small amount of tax spread like wildfire in the international financial world. Hungary is not like Malta or Luxemburg, where, due to the low population, real local production or service activity does not exist, thus these countries are rather used to facilitate internationally mobile services (and foreign tax authorities treat them accordingly as a result). Hungary is a moderately populated EU member state like Austria, Sweden or Czech Republic. There are only eight member states with significantly more inhabitants; so Hungary itself is an important economic player. Further, this is not a hidden privilege to a small circle of companies, there is no need to apologize to Brussels (who has by the way a number of disputes with Hungary on state aid).

And truly, HUF 145 bln is not the end of the world. This is only 20% of the 2016 corporate tax revenues and 1.35 % of the state revenues in total. So it could be a really good investment if, as a consequence, Hungary is seen internationally as a low-tax environment – let us not forget about the flat 15% personal income tax rate, either. Some countries may not welcome Hungary’s 9% tax rate however. A number of OECD countries do not treat dividends as exempt from taxes if the tax rate is too low in the source country. As a result, the group’s overall tax burden can be even higher than if everything had remained unchanged. Some multinational companies will be forced, at best, to transform their shareholding structure or, at worse, to move their activities somewhere else. Due to the sudden and surprise-like nature of the announcement, it seems unlikely that anyone has assessed the impact of this before the announcement. Another, rather odd, negative impact could be that deferred tax assets made for tax losses or tax allowances to be utilized in the coming years will need to be written off. Although this is more a matter of financial reporting rather than a cash flow issue, it might have an adverse effect in the short-term. In the absence of impact studies, we can only guess what the actual effects will be. My opinion is that the end result will be a somewhat positive, but… Reducing the corporate tax rate would have provided a once in a lifetime opportunity to develop a state and regional tax rate instead of the local business tax system. Because local business tax, in fact, is a problem. It is an above-the line item, it distorts and hinders competition and it helps the underdeveloped regions less than the developed ones, so it is also unfair. Hungary, for almost 30 years, has been unable to break out of the trap of the local business tax. It may be time to do something about that as well.

About OrienTax OrienTax, established in 2009, is a fast growing and independent tax firm. We have a team of 17 tax professionals and serve more than 100 clients. Our experts have gained their experience at Big4 firms or the Hungarian national tax authority. Our clients are major players in their industries.

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Restaurants and hospitality service providers in Hungary seemed to be operating under near hysteria at the turn of the year as the new regulatory environment made the calculation of VAT rates for sold food and drinks more complicated. However, with three weeks passed and the apparent settling of the tempest in a teapot, restaurants now seem to have adjusted to the new rules.

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Budapest Business Journal | january 27 – february 9, 2017

National Economy to Improve, Though Some Jobs may be Axed

Although the reduced contributions employers must pay the government for each of their workers as of this year is expected to have a positive effect on the Hungarian national economy overall, some companies could face problems generating enough income to meet the requirements of the increased minimum wage, and may need to rethink their business models, or even cut jobs.

“The decrease in the contributions is significant as it makes the required increase in the minimum wages easier, as well as improving the overall competitiveness of the national economy.”

Possibly Troublesome for Certain Firms

CHRISTIAN KESZTHELYI

Under a bill the Hungarian Parliament passed mid-December, the ratio of payroll tax was lowered from 27% to 22% as of the beginning of this year, and will further be lowered to 20% as of 2018. The healthcare contribution is being adjusted accordingly. A 9% flat-rate corporate tax ADVERTISEMENT

Péter Lakatos, vice president of the Confederation of Hungarian Employers and Industrialists (MGYOSZ). was established, replacing the earlier 10% on a tax base up to HUF 500 million, and 19% over that.

Along the lines of the decrease in contributions, representatives of the government, employers and employees signed an agreement on pairing the marked increases in the minimum wage with a drop in contributions. Under the agreement reached by representatives of the three sides, the minimum wage for unskilled workers will rise by 15%, while the wage for skilled workers will climb 25% from next year.

Beneficial for the Economy Although the proof of the pudding is in the eating and the exact effects of the aforementioned changes to the Hungarian economy will reveal themselves only as time passes, forecasts suggest that, on average, the national economy should benefit from the transformed environment, even if some jobs might be lost in certain sectors. “If all the circumstances stay unchanged, no new jobs would be created and some may disappear,” Péter Lakatos, vice president of the Confederation of Hungarian Employers and Industrialists (MGYOSZ), tells the Budapest Business Journal. “However, the economy changes dynamically; the situation needs to be evaluated in a system, and the changes on the whole might improve efficiency, and could make employment more attractive for fostered workers or the unemployed,” he adds. Therefore, overall, the changes should boost the economy. “The decrease in the contributions is significant as it makes the required increase in the minimum wages easier, as well as improving the overall competitiveness of the national economy,” György Vámos, general secretary of Hungarian Trade Association (OKSZ), tells the BBJ. He argues that while not every worker’s wages will rise, the contributions are cut in every single case, therefore it offers big relief for employers.

BBJ_2502_special_report.indd 14

It is apparently company and sector dependent whether the ratio of lowered contributions leaves enough room for increased wages. “For an engineering company, the 5% increase is compensated for by the dropped contributions. For a hospitality firm, or a processing company that employs many trained workers, however, the raise could mean a significant additional burden,” Lakatos says. “The regulations are normative, as far as the market is concerned. It is not the size of a company that counts, but efficiency, the rate of automatization and the business model,” he adds. Furthermore, some of the players of the retail sector might face real hardship in trying to cope with the changed regulatory environment. Vámos says that the retail sector has seen varying wages and burdens on average. He hints that, while increased wages could be easily generated by multinationals, some smaller companies might need to rethink their operations in order to keep up with the requirements. Smaller stores and food retailers especially might decide to opt for more part-time employment and apply shorter opening hours, such as closing for the night or on Sundays in some cases. However, Vámos expects the retail market to grow by 4-5%. He says the drop in the contributions has “huge significance”, and could slightly contribute to the creation of more jobs and to a lesser extent could decrease the tensions of labor shortage. The true effects of the changed environment will be seen only in the first half of the year.

Partly Whitening the Economy Vámos and Lakatos further add that the economy could also be slightly whitened in the new environment. “Basically, [changes] point toward the way [of whitening the economy], only its extent is questionable.” Lakatos elaborates. “However, we cannot expect the same amount of whitening as from the e-tills. At the same time, it must be noted that the danger is real that some companies will try to circumvent the regulations; as such companies who cannot keep up with the competition, might not choose to close doors, but could decide to enter a grayer or blacker mode,” Lakatos says.

2017. 01. 25. 22:17


www.bbj.hu

3

Budapest Business Journal | january 27 – february 9, 2017

CEU COLUMN

Where do Taxes Go? Noémi Alexa Ph.D. Assistant professor of integrity and leadership CENTRAL EUROPEAN UNIVERSITY BUSINESS SCHOOL

“Taxes” is a topic that entrepreneurs in Hungary are most concerned about. In a roundtable discussion organized by Bridge Budapest last year, it transpired that many entrepreneurs here are not aware of the complex legislation and do not feel that they would be able to get a proper understanding. Therefore, it is not surprising that those who are proud of keeping their business clean, mention their accountants as the guardians of transparency in the organization. And they are very right, since, as the legislation changes frequently, it is hard to comply with all the amendments. Hungary ranks 23rd on the International Tax Competitiveness Index. This seeks to measure the extent to which a country’s tax system adheres to two important aspects of tax policy: competitiveness and neutrality. A competitive tax code is one that keeps marginal tax rates low. A neutral tax code is simply one that seeks to raise the most revenue with the fewest economic distortions. The Organization for Economic Cooperation and Development (OECD) published an overall study about tax rates around the world in 2015. Rates vary between 17.4% (Mexico) and 46.6% (Denmark) of the GDP. Hungary’s overall tax rate is 38.6% of its GDP which is relatively high. As a comparison, Finland collects 44% of its GDP through taxes, while for Latvia it is 20.9% only, and Norway’s tax

BBJ_2502_special_report.indd 15

Fair entrepreneurs supported by great accountants do contribute to the competitiveness of Hungary. However, their job would be much easier if the government focused on curbing corruption and ensuring transparency in public spending. This would facilitate using the same ratio of tax revenues more efficiently, and move the country up from its 69th place in the Global Competitiveness Index. rate is similar to Hungary’s at 38.1% of the GDP. One would assume that a relatively high level of tax income is converted into improvements to the standards of living. The Social Progress Index, though, indicates that the same ratio of taxes can result in very different opportunities for people living in a given country. Despite the similarity in the level of taxation, Norwegians are seventh in the Social Progress Index, while Hungarians are only 35th. One factor that might explain this gap is corruption. The Corruption Perceptions Index of Transparency International, published earlier this week, indicates that Hungary’s corruption situation – within the region and Europe – is worrisome. The index is measured on a scale from 0 to 100 where 100 would mean a corruption-free country. Hungary scored 48 and ranked 57th in the index. This is the first year when Hungary has scored below 50, and below all those countries that joined the European Union at the same time in 2004. At the beginning of this century, Hungary had overtaken most of the countries in the region, except for Estonia and Slovenia. As of today, Hungary is among the file-closers in Europe, which is a signal of declining competitiveness of the country. Fair entrepreneurs supported by great accountants do contribute to the competitiveness of Hungary. However, their job would be much easier if the government focused on curbing corruption and ensuring transparency in public spending. This would facilitate using the same ratio of tax revenues more efficiently, and move the country up from its 69th place in the Global Competitiveness Index closer towards Norway’s 11th position. This column is part of a continuing series of opinion pieces from experts at the CEU Business School in Budapest. The opinions stated here do not necessarily reflect those of the Budapest Business Journal.

Special Report | 15

Progress on Banking Levy The new year brought news the banking sector has long hoped for; according to the Hungarian Chamber of Commerce, the bank levy will be reduced by three basis points to 0.2%. CLAUDIA PATRICOLO

This reduction follows an agreement signed last year with the European Bank for Reconstruction and Development (EBRD), and is part of a bigger program that will last until 2018. Minister for National Economy Mihály Varga has confirmed, in a press release, that banks’ taxes will be cut by a further HUF 20 billion for the sector as a whole next year. Both parties, the Hungarian government and the EBRD, agreed that creating a stable policy and regulatory framework for the banking sector is key to sustaining macroeconomic stability and promoting long-term economic growth. “We think the government has moved to a phase where it recognizes that a sound and profitable banking sector is crucial for the economy and the country as a whole,” EBRD regional head for Hungary and the Slovak Republic, Graeme Hutchison tells the Budapest Business Journal. The Budget Act for 2016, adopted last year by the Hungarian Parliament, was the first step to gradually reducing the bank levy, in line with the Memorandum of Understanding (MoU) signed with the EBRD. The EBRD promised to support the financial sector in several areas and to help banks by providing long-term funding on sustainable and commercial terms. As part of the agreement, EBRD has undertaken to maintain its cooperation with the government and the National Bank of Hungary (MNB) to help overcome problems with non-performing loan stock

that will allow banks to focus on new lending. “We welcome the recent initiative by the MNB, which is planning to introduce a recommendation on out-of-court restructuring of certain corporate sector loans, which we expect will encourage greater consensual resolution of NPLs [nonpaying loans],” Hutchinson says. The government has challenges, such as state involvement in the banking sector through the participation in M&A transactions, encouraging more longterm investments and developing more funding programs. All of these require the completion of a business-friendly tax and policy environment for the banking sector. “The government of Hungary made a series of undertakings when it signed the Memorandum of Understanding and these have, to date, been honored. This includes a substantial reduction of the banking levy, measures to address the non-performing loans issue, and improvements of the business climate by creating conditions of higher transparency and predictability,” says Hutchison. According to the EBRD report on the Hungarian situation, the biggest challenge now is to find new ways to raise competitiveness, for example through reducing the excessive bureaucracy that it says is holding the country back, the introduction of lower and simpler taxes and more improvements in education. When further banking sector consolidation can happen, and which market players drive it, will also have an influence. And while the government has undertaken the implementation of a more encouraging policy in the sector, the EBRD says these goals are impossible meet without a stable policy framework in general. “We believe that amendments are needed to the corporate provisions of the Bankruptcy Law to facilitate early restructuring. To enable the economy to continue to grow, further efforts are needed to facilitate an environment conducive to reasonable, prudent and sustainable lending,” Hutchison adds. The Ministry of National Economy was asking to comment for this article, but had been unable to do so before we went to press.

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16 | 3

Special Report

www.bbj.hu

Budapest Business Journal | january 27 – february 9, 2017

Accounting firms no. of full-time employees on januaRy 1, 2017 yeaR establisHed

HR Consulting

tRansfeR pRiCing

m&a

audit

management Consulting

tax Consulting

majoR Clients in 2016

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

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

total net Revenue in 2016 (Huf mln)

Company Website

net Revenue fRom aCCounting in 2016 (Huf mln)

Rank

Ranked by net revenue from accounting in 2016 (HUF mln)

oWneRsHip (%) HungaRian non-HungaRian

top loCal exeCutive Cfo maRketing diReCtoR

addRess pHone fax email

280 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

béla kakuk, zsuzsanna táborszki Cselovszkiné Zsuzsanna Táborszki Cselovszkiné –

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

pRoCess solutions kft. www.ps-bpo.com 1

2,623

4,515

Wizz Air, British Petroleum

tmf magyaRoRszág kft. www.tmf-group.com 2

862

1,561

Ÿ

76 1994

– TMF Group Invest Two B.V. (100)

101 1995

TMF Magyarország Kft. (100) –

béla kakuk Katalin Búzás –

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

62 1989

(100) –

péter Hajnal – –

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

101 1990

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

péter bergmann, péterné bergmann József Kiss, Sándor Soltész –

1138 Budapest, Váci út 186. (1) 238-9000 (1) 238-9010 bergmann@ bergmann.hu

95 2001

(100) –

zsolt kalocsai Klára Vaitz Szilvia Morvay

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

83 2002

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

Individuals (100) –

györgy Kőrösi, eszter balogh, andrea potássy – Tamás Dely

1143 Budapest, Stefánia út 101–103. (1) 887-3700 (1) 887-3799 klient@klient.hu

uCms gRoup HungaRy kft. 3

www.tmf-group.com

853

1,851

Maersk, Dreher

bdo HungaRy (aCCounting, payRoll and outsouRCing) 4

5

www.bdo.hu

BergMann Könyvelő iRoda pénzügyi szolgáltató kft.

810

757

2,400

846

Ÿ

Ÿ

www.bergmann.hu

6

Rsm HungaRy zRt. www.rsm.hu

671

1,429

Ÿ

finaCont szolgáltató és tanáCsadó kft. 7

www.finacont.com

662

783

Ÿ

Wts klient kft. www.klient.hu 8

653

671

Ÿ

52 1998

413

413

Ÿ

48 1990

Zoltán Tóth (50), Péter Berta (50) –

péter berta – –

8900 Zalaegerszeg, Ady utca 2. (92) 550-050 (92) 550-060 whc@whc.hu

49 1989

(100) –

istván Rajkai Józsefné Kulifai –

1142 Budapest, Erzsébet királyné útja 125. (1) 460-7412 (1) 460-7490 mlx@memolux.hu

Attila Kollár (100) –

balázs szentirmai – –

(100) –

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

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

WHC aCCounting kft. www.whc.hu 9

10

MeMolUX szervező, feJlesztő és szolgáltató kft.

383

502

Ÿ

Praktiker Kft., KIKA Kft., Shell Magyarország Kft., Interdean Kft., Cognizant Kft., Midio Magyarország Kft.

www.memolux.hu

11

12

eConoseRve gazdasági tanáCsadó kft. www.econoserve.eu

bpo audit tax www.mgi-bpo.hu

BBJ_2502_special_report.indd 16

297

295

651

580

Ÿ

51 1991

54 2001

1146 Budapest, Zichy Géza utca 5. (1) 422-1339 (1) 688-4869 info@bpokft.hu

2017. 01. 25. 22:17


www.bbj.hu

3

aCCaCe HungaRy kft. www.accace.com

198

380

Ÿ

m&a

tRansfeR pRiCing

HR Consulting

audit

pRepaRation of montHly and annual RepoRts

pRepaRation of ifRs RepoRts and finanCial statements ✓

management Consulting

tax Consulting

aCCounting tRaining

aCCounting Consulting

pRepaRation of aCCounting poliCy –

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

finanCial Consulting

majoR Clients in 2016

payRoll aCCounting

228

otHeR seRviCes

oWneRsHip (%) HungaRian non-HungaRian

top loCal exeCutive Cfo maRketing diReCtoR

addRess pHone fax email

30 1990

SASK Gazdasági Tanácsadó Kft. (100) –

Csaba molnár – –

2900 Komárom, Erdélyi utca 4. (34) 540-770 (34) 540-779 bilance@bilance.hu 1132 Budapest, Váci út 30. (1) 412-3530 (1) 412-3530 istvan.nemecz@ accace.com

30 1996

István Nemecz (30) ACCACE BPO (70)

istván nemecz, gábor kertész István Nemecz Masoud Tajik

– Alessandro Farina (100)

alessandro farina – –

1056 Budapest, Váci utca 81. (1) 269-5679 (1) 269-5625 info@itlgroup.hu

itl gRoup kft. 15

16

www.itlgroup.hu

balanCe kft.

www.balancekft.hu

170

390

Ÿ

Ÿ

Ÿ Ÿ

Ÿ

Special Report | 17

no. of full-time employees on januaRy 1, 2017 yeaR establisHed

14

www.bilance.hu

215

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

13

Bilance Könyvelő és adótanáCsadó kft.

total net Revenue in 2016 (Huf mln)

Company Website

net Revenue fRom aCCounting in 2016 (Huf mln)

Rank

Budapest Business Journal | january 27 – february 9, 2017

Ÿ

Ÿ

30 1995

20 1990

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

józsef dencsi József Dencsi Attila Körmöci

1119 Budapest, Fehérvári út 44. (1) 209-6448 (1) 209-6448 balance@balancekft.hu

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

20 1995

Branko Holding Zrt. (100) –

mihály Csécsei – Katalin Sáfár

1012 Budapest, Márvány utca 16. (1) 889-6200 (1) 889-6201 info@branko.hu

7 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

23 1994

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

márta siklós – –

1027 Budapest, Kapás utca 6–12. (1) 279-2930 (1) 209-4874 office@leitnerleitner.hu

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

andrea butkovics Ernő Varga Melinda Németh

1134 Budapest, Váci út 49. (1) 452-6900 (1) 452-6910 office@colling.hu

168

188

Eni Hungaria Zrt., Újpesti Egészségügyi Szolgáltató Nonprofit Kft., Dél-Budai Egészségügyi Szolgálat Nonprofit Kft., Fővárosi Művelődési Ház, Jäger Kft.

163

284

Ÿ

VERITAS Csatlakozástechnikai Kft., EOS Faktor Zrt., VIASAT Zrt., BEIERSDORF Kft., EXTREME Rendezvényügynökség

vgd HungaRy kft. www.vgd.eu 17

18

bRanko pénzügyi és számviteli kft.

19

faiRConto zRt.

www.branko.hu

www.fairconto.hu

162

141

303

202

Ÿ

leitneR+leitneR audit kft. 20

www.leitnerleitner.com

130

309

Ÿ

colling Könyvelő és tanáCsadó kft. www.colling.hu 21

92

134

Ÿ

76 1992

22

gRand Consulting kft.

80

80

Ÿ

9 2003

Eszter Danku-Szigecsán (100) –

tamás danku – –

1011 Budapest, Szilágyi Dezső tér 1. (1) 700-4141 (1) 700-4545 info@grandconsulting.hu

23

audit-labteCH kft.

62

62

Gyulai Kft., Cívis-Seed Kft., e-Vision Kft., Mustang Hungária Kft., Safety-Kleen Kft.

10 2007

Individuals (100) –

ildikó gál, beáta kincs – –

4026 Debrecen, Bem tér 14. (52) 522-090 (52) 522-091 office@audit.labtech.hu

24

peRsCRiptoR Könyvelőiroda Kft.

53

74

Ÿ

12 2010

Tibor Kmeczó (100) –

tibor kmeczó – –

1201 Budapest, Berkenye sétány 5. (1) 219-0991 (1) 219-0991 info@perscriptor.hu

25

38

FCB Hungary Zrt., Anita Hungária Kft., Gate-toTrade Kft., Turbo Plus Kkt., Videopress Kft., Quartisse Kft.

6 1994

Anikó Bónácz Vargáné (52), István Varga (33) individuals (15)

péterné bónácz Anikó Vargáné Bónácz István Varga

1224 Budapest, III. utca 13. (1) 362-4748 (1) 362-5355 info@caldera.hu

Ÿ

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

– Rödl International GmbH (100)

Roland felkai, krisztina nagy – –

1062 Budapest, Andrássy út 121. (1) 814-9800 (1) 814-9899 budapest@roedl.hu

25

www.grandconsulting.hu

www.audit.labtech.hu

www.precizkonyveles.hu

CaldeRa számviteli, pénzügyi és tanáCsadó kft. www.caldera.hu

mazaRs KönyvszaKértő és NR tanáCsadói kft.

Ÿ

Ÿ

Ÿ

Ÿ

Ÿ Ÿ

Ÿ

Ÿ

Ÿ

Ÿ Ÿ

www.mazars.hu

Rödl & paRtneR NR HungaRy www.roedl.hu

BBJ_2502_special_report.indd 17

Ÿ

1,266

Ÿ

1991

1991

2017. 01. 25. 22:17


hed

www.bbj.hu

Budapest Business Journal | january 27 – february 9, 2017

Hungary: the International Tax Expert’s Flexible Friend The words “flexible” and “amazing” are probably not the first that spring to mind for most people when thinking about the Hungarian tax authority (NAV). Yet EY’s New Yorkbased international tax partner Miklós Sánta insists that, for a select group of people, those descriptions are fully justified.

Miklós Sánta joined EY’s Budapest office straight from school in 2003, and worked his way up to manager. An opportunity came up in the international tax service division in 2009 for a one-year rotation in New York. There he joined a desk network, a group of foreign tax experts based in the United States to assist American, Canadian and Mexican multinationals with investment planning, in his case in Hungary. That one-year role was extended, with responsibility expanded across the CEE region. The desk network now numbers eight people, split between New York and Silicon Valley, covering 25 jurisdictions across Central and Eastern Europe, including the ex-Soviet states. After eight years in America, during which time he was made partner, Sánta now plans to move back to Hungary this summer.

ROBIN MARSHALL

And that brings us to one very important piece of good news for those doing business in Hungary: the reduction of the corporate tax rate to a flat 9%. “This,” Sánta says, “is huge.” When he told his clients, many thought he was joking. Hungary was already competitive at its old 19% rate. This move takes it into a whole new ball game. “This is an extremely low tax rate – there really is no other way of describing it. [.…] The most effective way to stay at the top of the list of investment destinations is to reduce the corporate tax rate. It has already generated vast interest in terms of potential crossborder deals. The race to the bottom has begun.” Hungary has traditionally competed with the likes of the Netherlands, Luxembourg and Ireland in attracting cross-border financial or IP holdings, Deals are relatively rare, but involve substantial amounts of money; Sánta says multinational players would not go to the time and expense of doing so for anything less than USD 1 billion, but some of the deals can be as large as

Incremental Income International tax advisors such as he have been trying to promote the idea of low corporate tax for about ten years, believing it would lead to incremental tax incomes for host countries. Hungary had already seen the benefits of its 19% tax rate; Sánta says one single deal in 2015, for example, generated half of

Hungary’s corporate tax income for that year. This experience has “made it easier to model and calculate how much you might expect to generate in income with a lower rate”, he suggests. The financial structures Sánta is talking about require a presence on the ground, but do not create huge numbers of jobs. As he puts it, in a USD 50 bln deal, the HR costs would amount to a rounding error. But the government also wants to bring well-paid and interesting jobs to the country to keep workers from moving abroad in even larger numbers. And there is news on this front, too. “One of its other initiatives is a reduction in the amount of employerrelated taxes and contributions – social security rates – by 4% from January 1 this year. And the government has pledged there will be further future reductions. Being competitive in employment taxation is a different ball game, but this is a step in the right direction.” That is a lot of positives for the start of the year, but what about risk? Are there any downside dangers? “That’s a good

“This is an extremely low tax rate – there really is no other way of describing it. […] The most effective way to stay at the top of the list of investment destinations is to reduce the corporate tax rate. It has already generated vast interest in terms of potential cross-border deals. The race to the bottom has begun.” question. It isn’t really a risk, but a very important aspect is to make sure it stays this way. It’s kind of like working out. Becoming fit is easy compared to staying fit. Foreign multinationals love good news, but they will want the rate cuts to remain in place for a good number of years – and not shoot back up – so they can do some robust modeling.”

Corporate tax: how Hungary Compares

TAX RATE

21%

33%

25%

25%

15.000

EUR

STANDARD CIT

20%

200.000 20% 12.5%

Luxembourg

The Netherlands

Ireland

9%

FLAT

This is Huge

USD 50 bln. Hungary’s three competitor states would find it hard to cut their own corporate tax rates much further, the tax expert argues. While the OECD has long campaigned against so-called “aggressive tax planning”, and targeted higher tax countries who have created complex low tax structures to attract investments, the tax expert thinks Hungary has followed a logical – and beneficial – path. “With 9% corporate tax, structures become more transparent, easier to set up and maintain. It leaves substantially fewer opportunities for other jurisdictions to argue against them,” he says.

CAPITAL GAIN GA

“ H ungary is most useful for international tax structuring,” Sánta told the Budapest Business Journal from his New York office. “It has a very unique tax regime, very flexible.” He accepts that NAV has a reputation “for sometimes being very ‘formal’, let us say, and not as supportive as you might experience in other jurisdictions. However, for a very particular group of transactions, Hungary’s financial holding and IP regimes provide amazing solutions. [...] It is not widely known to the public, because it is only of interest to a relatively small segment of global players.” Sánta makes the point that Hungary has always been committed to attracting investors who can bring taxable income to the country (and create jobs and products too), and that leveraging the benefits does have “a multiplier effect for the economy”.

P PASSIVE E

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Special Report | 19

3

Budapest Business Journal | january 27 – february 9, 2017

Tax consultants

1

kpmg tanáCsadó kft.

2

Rsm HungaRy zRt.

www.kpmg.hu

www.rsm.hu

686

1,429

Min. 300

95

2001

2001

Real estate Consulting

HR-Consulting

finanCial Consulting

payRoll aCCounting

aCCounting

auditing

exCise tax

otHeR seRviCes

adveRtising tax

seCtoRal oR speCial taxes

tax and finanCial due dilligenCe

tRansfeR pRiCe

CoRpoRate tax

peRsonal inCome tax and soCial seCuRity

vat

7,418

tax Consulting Related seRviCes yeaR establisHed

2,551

(1)

no. of full-time employees on JanuaRy 1, 2017

total net Revenue in 2016 (Huf mln)

Company Website

net Revenue fRom tax Consulting in 2016 (Huf mln)

Rank

Ranked by net revenue from tax consulting in 2016 (HUF mln)

oWneRsHip (%) HungaRian non-HungaRian

top loCal exeCutive Cfo maRketing diReCtoR

addRes pHone fax email

KPMG Hungária Kft. (100) –

Robert stöllinger, gábor beer William Curley Miklós Scheibelhoffer

1134 Budapest, Váci út 31. (1) 887-7100 (1) 887-7101 info@kpmg.hu

(100) –

zsolt kalocsai Klára Vaitz Szilvia Morvay

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

Individuals (100) –

károly Radnai – –

1124 Budapest, Csörsz utca 43, (1) 920-6800 – info@orientax.hu

– Ryan LLC (100)

brendan f. moore, g. brint Ryan Lori Johnson Jim Aubele

1054 Budapest, Szabadság tér 7. (1) 580-9200 (1) 580-9299 info@ryan.com

márta siklós, Judit Jancsa-pék – –

1027 Budapest, Kapás utca 6–12. (1) 279-2930 (1) 209-4874 office@leitnerleitner.hu

oRientax adótanáCsadó zRt. 3

4

www.orientax.hu

Ryan tax seRviCes kft. www.ryan.hu

610

500

610

500

19

2

2009

2014

leitneR+leitneR tax kft. 5

6

www.leitnerleitner.com

saldo pÉnzÜgyi tanáCsadó És infoRmatikai zRt.

489

506

21

2006

– Leitner+Leitner International GmbH (100)

476

814

59

1959

(100) –

márta sibinger Enikő Kovács Ágnes Kramer

1135 Budapest, Mór utca 2–4. (1) 237-9820 (1) 237-9811 tana@saldo.hu

360

360

18

2011

Individuals (100) –

zoltán lambert, tamás gyányi Andrea Potássy Tamás Dely

1143 Budapest, Stefánia út 101–103. (1) 887-3700 (1) 887-3799 klient@klient.hu

zoltán gerendy – –

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

www.saldo.hu

Wts klient adótanáCsadó kft. 7

www.klient.hu

bdo HungaRy (tax Consulting) 8

www.bdo.hu

325

2,400

14

1989

(100) –

121

783

83

2002

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

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

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

1146 Budapest, Zichy Géza utca 5. (1) 422-1339 (1) 688-4869 info@bpokft.hu

gábor dénes, ferencné Wessely – –

1118 Budapest, Alsóhegy utca 27. (1) 382-0106 (1) 382-0106 gdenes@forbis.hu

finaCont szolgáltató És tanáCsadó kft. 9

www.finacont.com

vgd HungaRy kft. www.vgd.eu

113

10

284

17

2001

11

bpo audit tax

103

580

54

2001

(100) –

12

foRbis adótanáCsadó kft.

103

103

8

2005

Individuals (100) –

www.mgi-bpo.hu

www.forbis.hu

BBJ_2502_special_report.indd 19

2017. 01. 25. 22:17


13

pmx Consulting gRoup magyaRoRszág adótanáCsadó kft.

101

101

5

www.bbj.hu

Budapest Business Journal | january 27 – february 9, 2017

Real estate Consulting

HR-Consulting

finanCial Consulting

payRoll aCCounting

aCCounting

auditing

exCise tax

otHeR seRviCes

adveRtising tax

seCtoRal oR speCial taxes

tax and finanCial due dilligenCe

tRansfeR pRiCe

CoRpoRate tax

vat 1994

peRsonal inCome tax and soCial seCuRity

tax Consulting Related seRviCes yeaR establisHed

no. of full-time employees on JanuaRy 1, 2017

Company Website

total net Revenue in 2016 (Huf mln)

Special Report net Revenue fRom tax Consulting in 2016 (Huf mln)

Rank

20 | 3

14

87

181

9

1995

15

68

502

49

1989

János Szalai (97.78) Péter György Natkay (2.22)

János szalai – –

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

péter bergmann József Kiss, Sándor Soltész –

1138 Budapest, Váci út 186. (1) 238-9000 (1) 238-9010 bergmann@ bergmann.hu

(100) –

istván Rajkai Józsefné Kulifai –

1142 Budapest, Erzsébet királyné útja 125. (1) 460-7412 (1) 460-7490 mlx@memolux.hu

István Nemecz (30) ACCACE BPO (70)

istván nemecz, gábor kertész István Nemecz Masoud Tajik

1132 Budapest, Váci út 30. (1) 412-3530 (1) 412-3530 istvan.nemecz@ accace.com

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

andrea butkovics Ernő Varga Melinda Németh

1134 Budapest, Váci út 49. (1) 452-6900 (1) 452-6910 office@colling.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

Láng Befektetési Kft. (Ÿ), ABT Treuhand Vagyonkezelő Zrt. (Ÿ) ABT Immobiliengesellschaft AG (Ÿ)

József láng – –

1037 Budapest, Montevideo utca 3/A (1) 430-3400 (1) 430-3402 abt@abt.hu 1068 Budapest, Dózsa György út 84/C (1) 428-6800 (1) 428-6801 deloitteinhungary@ deloittece.com

www.memolux.hu

16

aCCaCe HungaRy kft. www.accace.com

53

380

30

1996

addRes pHone fax email

www.bergmann.hu

MeMoLuX szervező, FejLesztő és szolgáltató kft.

top loCal exeCutive Cfo maRketing diReCtoR

1051 Budapest, Széchenyi István tér 7-8. C épület I. emelet (1) 803-7848 – info@pmxconsulting.hu

www.pmxconsulting.hu

beRgmann KönyvszaKértő és adótanáCsadó kft.

oWneRsHip (%) HungaRian non-HungaRian

CoLLing KönyveLő és tanáCsadó kft. www.colling.hu

42

17

18

faiRConto zRt.

34

www.fairconto.hu

abt HungáRia NR tanáCsadó kft.

Ÿ

www.abt.hu

deloitte NR magyaRoRszág www.deloitte.hu

134

202

Ÿ

16

7

Ÿ

1992

1995

1993

Ÿ

Ÿ

Ÿ Ÿ

Ÿ

Ÿ

Ÿ Ÿ ✓

Ÿ

14,442(2)

530(3)

1990(4)

– (100)

gábor gion, attila kövesdy Gerard Lucey Csanád Bánhegyi

Ÿ

13,717(5)

653(6)

1989

– Ernst & Young Center Cluster Limited (100)

botond Rencz Csaba Horváth Orsolya Ludvig

1132 Budapest, Váci út 20. (1) 451-8100 (1) 451-8199 tax@hu.ey.com

Ÿ

Ÿ

Ÿ

1991

Ÿ

Ÿ

Ÿ Ÿ

Ÿ

Ÿ

Ÿ Ÿ

– IB Interbilanz Wirtschaftsprüfung GmbH (100)

Waltraud körbler – –

1093 Budapest, Vámház körút 13. (1) 455-2000 (1) 455-2040 office@hu.gt.com

philippe michalak budzan – Eszter Rozgonyi

1123 Budapest, Nagyenyed utca 8–14. (1) 429-3010 (1) 235-0481 mazars@mazars.hu

ey magyaRoRszág www.ey.com/hu NR

NR

ib gRant tHoRnton Consulting kft. www.grantthornton.com

mazaRs KönyvszaKértő és NR tanáCsadói kft.

Ÿ

Ÿ

Ÿ

1991

Ÿ

Ÿ

Ÿ Ÿ

Ÿ

Ÿ

Ÿ Ÿ ✓

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

Ÿ

15,880(5)

673

1989

– 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

– Rödl International GmbH (100)

Roland felkai – –

1062 Budapest, Andrássy út 121. (1) 814-9800 (1) 814-9899 budapest@roedl.hu

www.mazars.hu

pwC Hungary www.pwc.hu NR

NR

Rödl & paRtneR HungaRy www.roedl.hu

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

Ÿ

1,266

Ÿ

1991

This list was compiled from responses to questionnaires received by January 25, 2017 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) Total IFRS net revenue of KPMG Tanácsadó Kft. in the business year of October 1, 2015-September 30, 2016. (2) Data of 2015. of Deloitte’s subsidiaries, Deloitte Zrt. provides tax services. (3) Aggegate no. of full-time employees of Deloitte Könyvvizsgáló és Tanácsadó Kft., Deloitte Üzletviteli és Vezetési Tanácsadó Zrt. and Deloitte CRS Kft. on January 11, 2017. (4) Establishment year of Deloitte Üzletviteli és Vezetési Tanácsadó Zrt. (5) Data of business year July 1, 2015June 30, 2016, consolidated management revenue. (6) Data of January 13, 2017.

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www.bbj.hu

Budapest Business Journal | january 27 – february 9, 2017

Then and Now Retrospective: A Special Publication of the Budapest Business Journal

1956

The Soviets Return22 Imre Nagy’s Radio Appeal, the end of the Revolution23 The Aftermath: Bloody Repression24 The Flag With a Hole25 The Rise of János Kádár and the “Happiest Barracks” 26 The First Democratic Elections27

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22 | 1956

www.bbj.hu

Budapest Business Journal | january 27 – february 9, 2017

In this, the second part of our Then and Now Retrospective: 1956, we look at the brutal and final supression of the Uprising, its immediate aftermath, and the eventual end of communist rule itself. In December, the Budapest Business Journal, among other publishing outlets, was commissioned by the Public Endowment for the Research on Central and Eastern European History and Society to produce a special supplement detailing the events of that time. Acknowledgements and thanks: We would like to record our gratitude to historian György Gyarmati for his help and expertise in producing this Then and Now Retrospective. This supplement has been financed by the 1956 Memorial Committee, established for the 60th anniversary of the Uprising, in the framework of The Year of the Hungarian Freedom program series. Words by Levente Hörömpöli-Tóth and Robin Marshall, page layout and design by Norbert Balázs, photos by Fortepan (www.fortepan.hu).

The Soviets Return On November 1, Soviet tanks rumbled back over the border and surrounded airports in Hungary, citing, according to the official explanation, “security reasons”. Imre Nagy demanded their immediate withdrawal from the country and announced Hungary’s exit from the Warsaw Pact. Two days later, the Hungarian government’s military delegation, led by Minister of Defense Pál Maléter, was invited to Tököl to negotiate the Soviet withdrawal. But that was a Febr 27 1949

Pollack Mihály tér. To the left is Puskin utca, to the right is the Festetics palace, on the corner of Bródy Sándor utca.

Soviet tanks rumble back over the border, citing “security reasons”. Imre Nagy declares Hungary’s neutrality, says the country is leaving the Warsaw Pact, demands Russia’s withdrawal and appeals to the United Nations for help.

November 1, 1956

BBJ_2502_special_report.indd 22

November 3, 1956

rouse, and the high-ranking military officers were arrested instead. The dawn of November 4 saw the launch of a large-scale attack by the world’s most powerful ground forces against Hungary. A radio announcement by the Soviet-backed János Kádár (a one-time ally of Nagy who had also been seen as a reform communist) was broadcast from Uzhgorod (Ungvár) in Ukraine, saying that a new government had been formed and that the intervention of the Soviet Union was “inevitable” as the events of October 23 had evolved into a “fascist counter-revolution”.

The Soviets launch a full scale dawn attack against Hungary with tanks back on the streets of Budapest. Nagy makes a last broadcast, informing Hungarians they are under attack and calling on the West to help. Cardinal József Mindszenty, freed from prison earlier in the Uprising, seeks asylum in the U.S. embassy; he will not leave until 1971. Nagy and other members of his government seek asylum at the Yugoslav embassy.

Hungarian government’s military delegation, led by Minister of Defense Pál Maléter, is invited to Tököl to negotiate the Soviet withdrawal, but it is a trap and they are all arrested.

November 4, 1956

November 11, 1956

Soviets claim victory, and in Budapest the battle certainly appears over, but sporadic, if fierce, fighting continues in the countryside at least until November 19.

2017. 01. 25. 22:17

H


19.

www.bbj.hu

4 Focus | 23

Budapest Business Journal | january 27 – february 9, 2017

Mátyás Rákosi

(March 14, 1892-February 5, 1971). Mátyás Rákosi was a confirmed Stalinist who had served during Béla Kun’s short-lived communist regime in Hungary after the end of World War I, but when it collapsed in August 1919, he fled to Moscow. He was sent back to Hungary by the Soviets in 1924 to revitalize the local Communist Party, but was arrested by the Miklós Horthy regime in 1925 and, in 1927, sentenced to eight years in prison, backdated to the time of his arrest. Upon completion of the sentence, he was rearrested and, in 1934, sentenced to life imprisonment, although in 1940 he was released and allowed to travel back to Moscow.

Imre Nagy’s Radio Appeal for Outside Help, the end of the Revolution

When Soviet forces entered Hungarian territory in 1944, Rákosi came with them and, as secretary of the Communist Party, quickly ensured power coalesced around him. By 1952, he had also taken on the role of prime minister, although following the death of Stalin, he was forced to give that over to the reform communist Imre Nagy. As party secretary he remained influential, however, and in 1955 engineered the dismissal of Nagy. But his victory was short-lived. He had angered Yugoslavia’s Marshall Josip Tito, and to appease him, Moscow had the increasingly unpopular Rákosi removed from power. With the outbreak of the Uprising, the former party head yet again fled to Moscow, but once the Soviets had quashed the revolution, it was a one-time ally of Nagy that they turned to in order to restore control: János Kádár.

Shortly after Kádár’s announcement, Imre Nagy made a radio broadcast in which he informed the Hungarian public that the invasion had started, and he appealed for outside aid. The Hungarian army wasn’t given the command to resist at all costs, however. Together with fellow senior government officials and their family members, Nagy sought asylum at the Yugoslav embassy. Yugoslavia’s communist leader, Marshall Tito, was playing a two-faced game, however: he agreed to have Nagy removed only in order to help the Soviets “restore order”. Broadly speaking, the Hungarian army put up little resistance, in compliance with a prohibition by generals of the ministry of defense; organized

collaboration with the revolutionaries took place only in Csepel and Dunapentele (now Dunaújváros, formerly known as Sztálinváros, about 80 km south of Budapest). Armed civilians, however, were driven by anger rather than logic, and they kept fighting in the hope that the situation would turn into a global scandal that might force the invaders to back down. In the capital, Csepel lasted longest, but even so, by November 11 the fight for Budapest was over. By contrast, near Pécs, for example, the armed conflict continued until November 19. The countryside as a whole witnessed heavy clashes in this phase of the revolution as well. Among others, Veszprém, Sopron and Dunapentele were engaged in bitter combat.

Bródy Sándor utca, from the direction of Múzeum körút.

Hungary defeats the USSR in semi-finals of the Melbourne Olympics water polo in the “Blood in the Pool” match that gains worldwide notoriety. Hungary goes on to defend its gold medal.

December 6, 1956

BBJ_2502_special_report.indd 23

December 1956-spring 1957

Following a secret trial, Imre Nagy and several other leaders are executed for their role in the 1956 uprising.

János Kádár seeks to consolidate his hold on power by initiating a period of brutal retribution against those involved in the Uprising. A law passed allows anyone over the age of 16 to be executed.

June 16, 1958

Pollack Mihály tér from the direction of Bródy Sándor utca, with the Festetics palace to the left.

2017. 01. 25. 22:18


24 | 1956

www.bbj.hu

Budapest Business Journal | january 27 – february 9, 2017

The Aftermath: Bloody Repression

Even once the armed clashes were over, Kádár’s legitimacy was still far from secure. For one thing, it was endangered by the influential workers’ councils, which wished to keep many of the achievements of the uprising. Moreover, Nagy himself posed a potential political challenge and opposition rallying point, since he refused to resign. He and his entourage were promised safe passage if they left the Yugoslav embassy, but this proved yet another trick; they were captured and imprisoned instead. In parallel, the workers councils were neutralized and a paramilitary party militia (known as “pufajkások”) was set up from former Communist party officials and members of the secret police. The latter, with help of the Soviet army, was used to repress all remaining nationwide resistance. The period from December 1956 to the spring of 1957 became known as an era of ruthless repression, with a view

to solidifying Kádár’s grip on power through intimidation and deterrence. Protests were put down from Miskolc to Zalaegerszeg by deadly volleys, with the one in Salgótarján claiming the most lives. Imprisonments and executions followed under martial law. In 1957, a decree allowed anyone over 16 to be punished by death. The youngest freedom fighter executed was Péter Mansfeld who received a life sentence at 17, which was changed to capital punishment days after he turned 18. Although exact figures are still subject to debate, up to 1963 around 23,000 revolutionaries were sentenced to prison, between 229 and 453 people were executed, and a further 13,000 were placed under surveillance. Nagy and several other leading figures of the revolt were executed on June 16, 1958 after a show trial. After the uprising, some 180,000-200,000 Hungarians fled the country.

Imre Nagy

(June 7, 1896 – June 16, 1958) Shortly after becoming a prisoner of war on the Eastern Front in 1915, Nagy joined the Russian Communist Party and then the Red Army. His ties to the USSR remained strong; later he even worked with the Soviet secret police. Following World War II, his political career in Hungary gained full motion: he held various ministerial posts representing the Hungarian Communist Party, and was also the speaker of the National Assembly. From 1953 to 1955 he headed a government with a “new socialism” course on its agenda, but fell

out of favor with the Soviet Politburo and was deprived of all political and executive titles. During the 1956 Uprising he became the ultimate political figure, leading Hungarian ambitions for independence by appealing through the UN to the Great Powers to recognize Hungar y as a neutral state. After the Soviets put down the revolution, he was secretly put on trial and hanged. Nagy was buried face-down, with his hands and feet tied with barbed wire. His fate was meant to deter other reform communist leaders. It was strictly forbidden to commemorate his death. His rehabilitation followed only in 1989.

Blood in the Pool: December 6, 1956 Melbourne Olympics One of the iconic sporting events most closely related to the revolution was the water polo match between Hungary and the USSR in the semi-final of the Melbourne Olympics on December 6, 1956 where Ervin Zádor was punched in the face by Soviet player Valentin Prokopov so hard that it caused a bloody gash, leading to the “Blood in the Water” moniker adopted in the world press. The Hungarian national water polo team had learned about the extent of the Soviet crackdown only after arriving in Australia, and desperately wanted to take revenge in the pool. With only one minute to go, Hungary was leading 4-0, and Zádor had scored two of the goals, when he was punched. The game ended prematurely, but Hungary was declared the winner and went on to defend its Olympic title in the final against Yugoslavia. The game against the USSR, however, came to symbolize the Hungarian struggle against Soviet rule.

Vámház (Tolbuchin) körút .

Vámház (Tolbuchin) körút 12.

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www.bbj.hu

Budapest Business Journal | january 27 – february 9, 2017

4 Focus | 25

The Flag With a Hole

The red, white, and green tricolor emerged as the symbol of Hungarian national sovereignty against the Habsburgs during the 1848-49 revolution. Once the flag was declared legal again after the 1867 Compromise regulating relations in the Dual Monarchy, it underwent several changes throughout the decades as to what was displayed against the backdrop of the

tricolor. Predominantly, though, it featured the country’s coat arms, with or without St. Stephen’s Holy Crown on the top. The Stalinist regime replaced that coat of arms with a Communist one featuring the red star. During the 1956 revolt that emblem was cut out and so the “Flag with a Hole” became an iconic symbol of the revolution and freedom.

Bécsi kapu (Gate) in the Castle District.

The National Archives building, from the direction of the Linzi Stairs.

A makeshift grave at Ferenciek tere (Felszabadulás tér).

Breakup of the Golden Team

The revolution also had devastating consequences on Hungary’s gloriously gifted national soccer squad, the “Aranycsapat” (Golden Team), deemed by many Hungarians as the best ever assembled in history. The majority of the players were with Budapest Honvéd, which had a European Cup game in Spain when the revolt started. Because of the events in Budapest, the team decided not to go back, and played the “home” leg against Athletic Bilbao in the neutral venue of Brussels, and afterwards left on a South American tour, in spite of the prohibition of the Hungarian Football Association. In January 1957, when they returned from that tour, most players decided to stay abroad. Puskás, the biggest star went to Real Madrid, while legendary strikers Sándor Kocsis and Zoltán Czibor were signed by Barcelona. Gyula Grosics, the goalkeeper, was not a Honvéd player, but had been invited to take part in the tour due to a high number of injuries. He did return home, in July 1957, but was kept under surveillance for a long period. Nándor Hidegkuti also went back to play and then to become a manager, and so did József Bozsik. However, the Aranycsapat as such ceased to exist.

BBJ_2502_special_report.indd 25

The Szent Imre statue group at Móricz Zsigmond körtér.

2017. 01. 25. 22:18


26 | 1956

www.bbj.hu

Budapest Business Journal | january 27 – february 9, 2017

Nikita Khruschev

(April 15, 1894September 11, 1971)

Khruschev rose quickly through the Russian Communist Party ranks after World War I, and reached the very top upon the death of Stalin in 1953. In February 1956 he denounced his predecessor’s crimes in a famous “secret” speech held at the party congress. His de-Stalinization policy – under which many political prisoners were released and the rules on freedom of expression were somewhat liberalized – inspired anti-Soviet movements in Poland and Hungary.

Gradual Easing, the Rise of János Kádár and the “Happiest Barracks” (Goulash Communism)

He wanted to strengthen the Soviet sphere of influence, though. In this effort he oversaw the building of the Berlin Wall, ruthlessly put down the Hungarian revolution in 1956 and nearly provoked a nuclear conflict with the United States over missiles deployed in Cuba in 1962. One of his best-known moments came when, at a UN General Assembly in October 1960, he banged his shoe on his desk, infuriated by the Philippine delegate’s criticism of Soviet colonization. In the so-called “kitchen debate”, in turn, he argued with U.S. Vice President Richard Nixon over the SovietAmerican race regarding innovation in home appliances. Khruschev was ousted from power in 1964 and replaced by Leonid Brezhnev. He spent his remaining years at his estate and writing his memoirs.

Reinternment Ceremony at Heroes’ Square (June 1989)

A 1963 mass amnesty releasing more than 3,000 political prisoners was a sign of the ultimate stabilization of the Kádár regime. (Yet, it should be noted that those fighting on the barricades remained behind bars until the early 1970s.) A new “soft dictatorship” was forming, as opposed to the previous full-blown Stalinist oppression. Under the motto “Whoever is not against us, is with us”, the establishment allowed society to continue as long as it kept quiet and stayed away from politics. Absolute taboos were to question the one-party rule and loyalty to the Soviet Union, and to mention the repression after 1956 in any way. In return, there were attempts to

improve living standards. Under so-called “Goulash Communism” the country became known as the Happiest Barracks of the Eastern bloc from the ’60s on, which meant slightly better living conditions and a less controlled political atmosphere compared to other socialist states. Afterhours private work was tolerated, and that provided many with the extra income necessary to own a car, a simple vacation home, a TV or a fridge. However, the centrally planned communist economy was so inefficient that, after the global oil crisis of the ’70s, living standards could only be maintained by foreign loans. Over dependence on these, however, had caused a debt spiral by the ’80s.

On June 16, 1989 the re-internment of Imre Nagy took place at Heroes’ Square along with those executed with him: Pál Maléter, military leader and Minister of Defense; József Szilágyi, the head of the Prime Minister’s staff; and Miklós Gimes, a leading journalist. A fifth coffin belonged to Géza Losonczy, Minister of State, who had died in prison in 1957, while a sixth represented all the

other victims of the Uprising. The event drew 250,000 and it became a symbol for the end of communism. It is worth noting that one of the speakers was an individual, then largely unknown to the wider Hungarian public, called Viktor Orbán who spoke on behalf of the young generation and, in an electrifying piece of political theater, called on the Soviets to “go home”.

As the Kádár regime began to fall apart, there was a growing demand from the public for a coming to terms with the past, while a fair assessment of the events of 1956 was also highly overdue. Hundreds of people went to Plot 301, the burial place of the martyrs at the Új köztemető (New Public Cemetery, although it opened in 1886) to commemorate the heroes of the revolution on June 16, 1988, which

marked the 30th anniversary of the execution of Imre Nagy. At that time, police arrested some of the participants. But high-ranking party official Imre Pozsgay labeled 1956 a “folk uprising” (as opposed to the official term of “counterrevolution”) in January 1989, and opposition forces were gaining strength; it seemed the tide was now turning against the forces of repression.

Febr 27 1949

The Soviet Culture House at Kossuth Lajos utca 20.

Finally secure in power, János Kádár orders a mass amnesty that sees more than 3,000 political prisoners released (though not those who fought on the barricades).

1963

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1960s

“Goulash Communism” attempts to improve living standards and the country became known as the Happiest Barracks of the Eastern bloc. Controls are less strict, but discussion of 1956 is still off the agenda.

Móricz Zsigmond körtér.

The global oil crisis hits the economy hard, and Hungary is forced to start borrowing money to maintain standards.

1970s

1980s

Opposition parties meet together for the Monor conference, debating the future they want for the country.

Hungary’s economy begins to spiral out of control under a massive debt burden. Public unrest grows stronger.

June 14-16, 1985

June 16, 1988

Hungary’s Prime Minister Miklós Németh tells Soviet leader Mikhail Gorbachev that Hungary cannot afford to maintain its border controls and he plans to dismantle the barbed wire along the border. Gorbachev says Hungary’s border security is Németh’s concern, not his.

Hundreds gather at the grave of Imre Nagy to commemorate the 30th anniversary of his execution. Arrests are made.

March 1989

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János Kádár

(original name János Csermanek, May 26, 1912-July 6, 1989) Kádár was first secretary of the Hungarian Communist Party from 1956 to 1988. He joined the thenillegal communist movement at the age of 17 and was arrested many times until the end of the World War II. In the meantime, he climbed up the ladder in the party and was admitted to its Central Committee and the Politburo. Kádár became minister of interior in 1948 after the Communists won the 1947 elections by using fraudulent methods, which gradually lead to Stalinist one-party rule. In 1949, as an accomplice of Rákosi, he was engaged in pushing through the murderous show trial against László Rajk and co-defendants, all while holding key positions, such as deputy secretary general, interior minister

and lieutenant of secret police ÁVH. One year later he became persona non grata: he was forced to resign from his post as interior minister in 1950, and he was imprisoned between 1951 and 1954. After his release he gradually regained his influence in the party. At the time of the revolution in 1956 he was minister of state in the newly established government of Imre Nagy, but betrayed the Revolution by helping restore Soviet rule with help of Moscow. Kádár orchestrated a political vengeance of unprecedented scope by Hungarian standards against participants of the Uprising. His decades of “soft dictatorship” aimed at providing the illusion of relative prosperity and freedom of speech, but it actually resulted in deep moral decay and a debt-fueled economic collapse. He lived to witness the re-internment of Imre Nagy (who he had hanged for his leadership in 1956), in June 1989. Kádár died just a few days later, on July 6, 1989, on the day Nagy was legally rehabilitated by the Supreme Court.

Fehérvári út, with Móricz Zsigmond körtér to the right.

The Change of System, First Democratic Elections (March 1990)

Alkotás utca from the direction of the Southern Railway Station.

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Budapest Business Journal | january 27 – february 9, 2017

June 16, 1989 250,000 attend the re-internment ceremony for Imre Nagy and other leaders at Heroes Square. A young Viktor Orbán, addressing the crowds, tells the Soviet occupiers “Russians, go home!”

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János Kádár dies, on the very same day Imre Nagy is legally cleared of high treason and rehabilitated by the Supreme Court.

July 6, 1989

August 19, 1989

The communist regime legally ceases to exist, and a new Hungarian Republic is proclaimed in its place.

Thousands of East Germans have been gathering in Hungary, hoping to find a way through to the West. Locals decide to organize a Pan-European Picnic in Sopron, close to the border with Austria. At around 3 p.m., a group of a few hundred men women and children decide to push through the border gates and into the West. German Chancellor Helmut Kohl notes: “It was in Hungary that the first stone was removed from the Berlin Wall.”

October 23, 1989

March 25, 1990

First free elections are held, center-right Hungarian Democratic Forum (MDF) wins power in a coalition with the Christian Democrats and the Smallholders’ Party.

Economic problems triggered ever more social dissatisfaction by the mid’80s, and the ruling communist party was gradually losing control of political developments. The “glasnost” reform policies of the new Soviet leader, Mikhail Gorbachev, paved the way for accelerating fundamental changes in the Eastern bloc. Hungarian opposition forces gathered for a meeting in Monor in 1985 for the first time, and by the fall of 1988 the first democratic parties had been formed. March 1989 saw official talks started about peaceful political transition between the ruling MSZMP (the communist party in Hungary, though it used the term socialist) and the new democratic forces under the so-called Opposition Round Table consultations. The re-internment of Nagy in June that year was another milestone on the way to the collapse of the communist regime, which legally ended on October 23, when the new Republic was declared. The first democratic parliamentary elections took place in the spring of 1990 and as a result six parties and 10 independent MPs were represented in the legislative body. MDF, the Hungarian Democratic Forum, won the elections with 42.5% and formed a center-right coalition government led by József Antall. Even so, Soviet troops didn’t leave the country until June 19, 1991.

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Budapest Business Journal | january 27 – february 9, 2017

Then and Now Retrospective: 1956

The Revolution in Numbers Some 2,346 were killed (1,847 in Budapest and 596 in the countryside) and some 20,000 injured during the Uprising. Up to 1963, around 23,000 revolutionaries were sentenced to prison, between 229 and 453 people were executed, and a further 13,000 were placed under surveillance. After the Uprising, some 180,000-200,000 Hungarians fled the country.

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Vegetarian Hungary

David Holzer explores the challenges of being a vegetarian in largely carnivorous Hungary, and finds life is gradually becoming easier for those who chose to “pass” on the meat.

for running from Budapest to Moscow and was often in the media for swimming across the Danube and the Tisza in the winter. Think about that while you munch your falafel. Schirilla wrote a number of books that referenced vegetarianism, including “Vegetarianbook”. Sadly, this remarkable man died in 1999.

Alive and Well

DAVID HOLZER

I’ve been vegetarian off and on for most of my adult life. My Hungarian partner has followed the way of the vegetable since the early 1980s. When I moved to Szeged to be with her I bowed to the power of the vegetable all over again. Apart from the occasional bucket of Szeged fish soup, of course. Putting willpower to one side, it has not been difficult to be vegetarian in England for many years. Supermarkets carry complete ranges of veggie ready meals. Thanks to the legacy of the British Empire, we’ve become comfortable flinging all manner of weird and wonderful Chinese, Indian, West Indian and Who-knows-wherian spices and sauces into the bastardized ethnic specialties we make at home. Not so in Hungary. My partner was regarded as close to insane when she went vegetarian. Even now she’s in the minority in Szeged, where we live. Up until recently, a meal out for her has involved some sort of deep-fried cheese or a towering mound of nuked vegetables. Usually cooked in meat fat. And this in a country where fresh local Hungarian produce is cheap and plentiful. When we took our first trips to the UK and Sweden together, my partner was in ecstasy at the range of veggie options on offer. Heaven for her was working her way through a salad the size of her head or a swimming pool of soup served by eightfoot tall people who strode up to our table chirping “Hi, Hi!” with frighteningly good health and good cheer. In recent months, though, things have been looking up for us in Hungary on the vegetarian front. But, before I explain why, a brief history of vegetarianism in Hungary.

The Roots of Hungarian Vegetarianism There must have always been Hungarian mavericks who refused to eat wild boar because they simply didn’t want to. But the recorded history of vegetarianism in Hungary begins with the establishment of the Hungarian Vegetarian Association, later the Hungarian Vegetarian Society

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(HVS) – a vitally important distinction – in 1883. This is about what I expected. I’d assumed that the influence of Germany and Austria on Hungary, along with the country’s own intellectual richness, would have naturally led to enlightened people embracing vegetarianism. At this time in Germany, vegetarianism – along with nudism, embracing esoteric belief systems, worshipping the goddess and many aspects of today’s New Age – became fashionable. Some of these ingredients would go on to inform rather more mass movements. Hitler was vegetarian. But we won’t go there. The HVS was set up to educate the Hungarian population as to the benefits of vegetarianism and improve its general health. What may have been the first ever Hungarian veggie restaurant, The Reform, opened in Vámház körút in 1911. There was a vegetarian menu at the Thalysia in Király utca. HVS members received a discount at the grand Joseph Archduke Hotel if they ate vegetarian. For the vacationing veggie there was always the “meatless dietetic holiday” at Balatonföldvár set up by a Dr. István Rusznyák. Hungary also had vegetarian magazines. Natural Lifestyle was the official publication of the HVS. A magazine called Lifereform was published in Szentendre between 1932 and 1938.

Enlightened Various enlightened Hungarians also championed the vegetarian and natural lifestyle. Béla Bicsérdy preached the benefits of raw food up until his death in the early 1950s and wrote a

book called “The Book of Art of Life and Macrobiotics”. A particularly intriguing figure is Dr. Gyula Bucsányi, a naturopath, who was ahead of his time in arguing that conditions like arteriosclerosis and diabetes could be treated with a change of diet. Bucsányi was also a great believer in sun worship, or heliopathy. But the clue to why vegetarianism died out around the mid-part of the 20th century lies in the various Hungarian communities that promoted vegetarianism as part of a rather more ambitious agenda. These included the Gödöllő art center, which sprang up in 1901, and especially the “vegetar community” at Izbég near Szentendre. Established in 1930, this had 90 members by 1935, which is not bad. Hungarian socialism saw communities such as these as a threat because the values of openness and tolerance they promoted were anathema to a system based on control and repression. Anything that promoted a natural lifestyle, including vegetarianism, was suppressed. In the early 1950s the HVS was shut down. The end of socialism in Hungary in 1989 ushered in an explosion of interest in all things alternative or New Age, including vegetarianism. For instance, in the late 1990s the Ahimsa Hungarian Vegetarian Society of Veszprém was created. It publishes The Vegetarian. Certain individuals also did their bit to promote vegetarianism. The extraordinary György Schirilla, born with a congenital illness, became a teenage vegan while training as a sportsman. Schirilla was influential in promoting the triathlon in Hungary. He was also famous

Today, vegetarianism is alive and well in Hungary, or at least in Budapest and certain outposts. While it has to be said that Hungarian cuisine remains resolutely meaty, it’s become easier for vegetarians to eat well in Hungary. Even in Szeged, the home of the famous Pick salami factory, there are a couple of decent vegetarian restaurants. Incidentally, the Pick factory boasts a museum of salami. I haven’t yet found the courage to visit. But when we come up to Budapest, we are not far off being spoilt for choice. Thanks, I guess, to the backpackers and other international nomads who fall in love with the city and decide to stay a while. In the seventh district, centered on Király utca, there’s now a great choice of vegetarian and vegan restaurants. If you’re like me, though, you may be a little bored by menus essentially the same as those you’ll find in any hipster ghetto anywhere in the world. (While, of course, feeling both blessed and grateful, Namasté.) I’m on a mission to find places that offer Bambi-free versions of the Hungarian cuisine I’ve fallen in love with. Kőleves vendéglő at 41 Kazinczy utca is on my own Budapest restaurant bucket list. It’s apparently housed in what was a kosher meat factory, which may or may not say something profound about the changing nature of eating habits in this country. At Kőleves vendéglő, apparently, you can eat butternut squash, spinach and feta streusel in tomato sauce which sounds to live, rather than, die for. If you are vegetarian, vegan or just curious, you should definitely check out the Hungarian-Vegetarian Walk offered by award-winning organization Taste Hungary. The tour begins at Budapest’s Central Market Hall where your guide, a local food journalist, whets your appetite by explaining how Hungarian cuisine uses the local and seasonal ingredients. From there you’re taken on a tour of vegetarian and vegan restaurants that ends in lunch at a restaurant that serves veggie versions of favorites like gulyás or goulash and stuffed cabbage. Sadly, I can’t tell you where this is, because I haven’t taken the tour…. yet. Find out more about the HungarianVegetarian Walk at www.tastehungary.com

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Budapest Business Journal | january 27 – february 9, 2017

Furmint and Hárslevlű: a Marriage Made in Tokaj

While the frenzy around the Furmint grape gathers ferocious force as we head into “Furmint February”, which this year will be chimed in by the world’s first “International Furmint Day” on February 1, I do feel sorry for the oftneglected Hárslevelű grape. While I’m not saying that the muchlauded Furmint is an ugly sister to Hárslevelű’s Cinderella, it is all too often assumed that Furmint is far superior, although my palate tells me that many – often dry – Furmints actually flatter to deceive and that Hárs deserves its share of the spotlight. ROB SMYTH

As Tokaj started to move in a progressively dry direction following the millennium – with the region’s winemakers realizing that demand for sweet wine was well and truly on the wane – Furmint got most of the attention, with dry Hárs being more of an afterthought. Dry Furmint with its taught, steely character, racy acidity and quince (unique), citrus fruit and hazelnut notes, as well as its ability to capture the nuances between different vineyards, ADVERTISEMENT

the first of which daringly brings can indeed be outstanding. a third grape into the mix: However, it can sometimes be a little too austere on the nose and palate. Meanwhile, Holdvölgy Vision as more attention has gone 2014 into getting the best out of Hárslevelű, the second most 40% Furmint, 40% Hárslevelű widely-planted grape in Tokaj and 20% Kabar (a crossing of after Furmint, it appears that Hárslevelű and Bouvier) with it can also be an articulator the grapes picked and vinified of terroir. Hárs also tends to separately, and later blended, have more generous aromas with 50% of the wine spending and flavors that nicely merge four months in used oak barrels. fruit with florality, and it can Coming from an extremely also age very well. difficult vintage, the grapes Someone once described, required three to four times in what sounds like slightly more selection than in a regular sexist language in 2017 vintage in order to throw out (but I’ll say it anyway), any bad eggs, i.e. diseasethat Furmint is the wife, afflicted grapes. However, providing structure and this wine received the best of focus, while Hárslevelű is the grapes usually destined the wild, passionate lover for the premium singlethat can take you places vineyard wines, which you never envisioned. were not made in this The point is that together challenging year. they are hard to beat Vision 2013 scooped a and work so beautifully seriously impressive gold in tandem, although medal at the Decanter that racy description Asia Wine Awards applies especially to 2015 and wowed with sweet wine and Tokaji its freshness and Aszú – the more I airiness combined taste sweet wines with a good chunk of from all around the concentration. The globe, the more I’m 2014 is a little richer, convinced that Tokaji with more body but not Aszú is up there with with quite the same the very best, if not lightness of touch the best. as its predecessor. However, what if It has a smidgen both grapes went to of butteriness with the dry Tokaj wine pineapple and melon ball? Not only is it along with citrus and a compelling story lime zest. The 5g/l due to the fact that of residual sugar the two team up is nicely balanced so successfully in by the relatively high Tokaji Aszú, but the 7.2 g/l of acidity and proof has very much actually results in a dry, been in the pudding quite refreshing finish. with some excellent Different in character blends coming out in to the award-winning the last few years. 2013, but none the less Here are two impressive and great Holdvölgy Vision 2014. exciting offerings, value at HUF 3,000. It is available from Üveg/Ház, CultiVini Borgaléria and Andante Borpatika.

Kaláka Tökösmál Cuvée 2015 Containing more Hárslevelű than Furmint, the grapes for this wine were picked on a remarkable eight occasions. It comes from a single vineyard near the village of Tállya, which is the latest “El Dorado” of the Tokaj wine region. Founder/owner László Alkonyi knows a thing or two about Tokaj’s vineyards, having written some of the best books on Tokaj, and was also an early advocate of the single vineyard approach. The Tökösmál vineyard, which has a 600-year-history of growing grapes and was historically ranked as first-class, lies at 250 meters above sea level and has very good air circulation to protect against disease. The vines are in the

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Kaláka Tökösmál Cuvée 2015. prime of life at between 40 and 50 years old and grow in a cocktail of prized volcanic soils comprising rhyolite, andesite and kaolinite. It is practically organically cultivated on all but paper, with just small amount of copper and sulfur being applied in the vineyard and cellar. The Hárslevelű and Furmint grapes are pressed by a 100-year-old Kossuth press and the must then goes into a steel tank and is fermented by its own yeast. In an exciting twist, the must from the grapes harvested at a later date are then poured on top of the fermenting wine. There are multiple harvests to ensure that each batch is ripe but not overripe, thus avoiding bitter phenols from underripeness and surging alcohol levels from leaving the grapes out too long. The wine receives no ageing in oak, but is remarkably rich for all that. The upshot of all this is an outstanding wine that strikes a great balance between crispiness, complexity, concentration, fruit and stoniness, whereby the characteristics of neither grape dominate. At HUF 10,000 (from Bortársaság) it may seem very expensive for such a new winery, but a heck of a lot of effort and attention to detail has gone into making it.

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WHAT’S “THE FIRST GOLDEN AGE” Műcsarnok 1146 Budapest, Dózsa György út 37. Until March 12, 2017

Monarchy at “The First Golden Age” exhibition, boasting oversized paintings portraying ordinary landscapes and prominent people of the era, including historic Budapest neighborhoods, and depictions of emperor Franz Joseph and Sissi, the

A selection of masterpieces is on show from the time of the Austro-Hungarian

Magyars’ beloved queen. Presenting an overview of some 200 paintings created over half a century, this vast exhibition is a collaboration between museums and private collectors from Hungary, Austria, Czech Republic, Poland, Romania, and Croatia. The showcase is complete with pieces by renowned artists, including Austrian painter Hans Makart, Polish master Jan Matejko, and globally revered Hungarian painter Mihály Munkácsy, each depicting historic morsels of the era from different perspectives. “AT HOME AGAIN – MARCEL BREUER” Museum of Applied Arts 1091 Budapest, Üllői út 33-37. Until June 11, 2017

Műcsarnok/Kővári György Márió

View fascinating fixtures by globally revered Hungarian-born architect and furniture designer Marcel Breuer, now on show in the Museum of Applied Arts. As a master of the Bauhaus School, Breuer created a new architectural direction that made him one of the world’s most popular characters in 20th-century design history. Among the pieces on view, visitors can view the artist’s conference table that was once part of his office in New York, alongside his famous Wassily Chair, the first-ever chair to feature a bent-steel frame and marked the beginning of a new era in modern furniture. Additionally, the exhibition shows office furnishings of seven

“SHADOW ON STONE – THE ART OF LILI ORSZÁG” Hungarian National Gallery 1014 Budapest, Szent György tér 2. Until March 26, 2017 The Hungarian National Gallery pays tribute to Magyar painter, graphic designer, and puppet maker Lili Ország by showcasing a collection of her entire oeuvre through pictures, photos, and diverse documents that are related to her life. From surreal visuals to icon paintings to puppets, along with theatrical backdrops, viewers of the display are introduced to the varied eras of the life of an artist who continually strove to seek new motives that she used as recurring themes in many of her paintings, including the wall as an emblem of distress; however, she also gained inspiration from her journeys outside of Hungary. The highlight of the exhibit is the display of the Labyrinth series presented according to Ország’s original concept – this major installation contains more than 50 works of the artist, resulting in a never-before-seen composition. Text provided courtesy of WeLoveBudapest.com

Marriage Illusion

translated by: Krisztina Oláh,

It is always risky—inadvisable even— to confide in one’s spouse. That a couple could be based on honesty is an illusion. Take Jeanne and Maxime. After several years of being happily married they decide to confess some of their little lapses. This triggers some serious soul-searching, legitimate suspicions, accusations of all kinds, and intolerable jealousy. No lies are without consequences, no truths without peril. Ultimately, trust has to remain an illusion. That’s probably the basic condition for a peaceful marriage. Rózsavölgyi Szalon will premiere yet another popular contemporary French play. The cast of The Marriage Illusion will unveil the small secrets between a married couple with cruel honesty, only for these small secrets to turn into a huge lie over time. As usual, there is a third person who cannot be left out of the equation. In addition to high emotions pushing the participants to breaking point, there is lots of humor int he play as well, making the story of these three people even more layered and exciting. The French playwright, famous for his comedies, has won the prestigious Molière Award twice, first time for The Marriage Illusion.

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contemporary Hungarian designers who were connected to Breuer or influenced by the master’s works.

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Eric Assous: The

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Hungarian premiere

Cast: Andrea Bozó, Zsolt László, Gergely Kocsis Dramaturg: Krisztina Oláh Set design: Péter Enyvvári Costume design: Anni Füzér Director: Tibor Csizmadia Hungarian premiere: February 9, 2017 Further performances: February 11, March 10,12, 29 Rózsavölgyi Salon Arts & Café 1052 Budapest, Szervita tér 5. • Tel.: +36 1 486 33 38 Ticket Information: +36 30 463 88 22 szalon@rozsavolgyi.hu www.szalon.rozsavolgyi.hu facebook.com/rozsavolgyiszalon

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