Budapest Business Journal 2703

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

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BUSINESS JOURNAL BUDAPEST

VOL. 27. NUMBER 3

FEBRUARY 15 – FEBRUARY 28, 2019

SPECIAL REPORT Taxation and Accounting SPECIAL REPORT

Tax Evasion no Longer a National Sport, but More Must be Done Efforts to make taxation in Hungary more transparent and, as a result, reduce tax fraud has brought some good results in the past few years. In particular, shrinking the so-called VAT Gap has led to improved tax collection.  14

SPECIAL REPORT

Online Invoicing a Success, Experts Say Launched last summer, Hungary’s online invoice reporting system has now been running for more than half a year – enough time for NAV to start to do some checks and for tax experts to analyze first impressions, experts tell the BBJ.  16

Riding an Indian Investment Wave

SOCIALITE

Ráth Villa, Budapest’s Shrine to Hungarian Art Nouveau David Holzer embarks on a pilgrimage to discover the differences between Hungary’s Szecesszió movement and the Art Nouveau. world it sprang from. 22

NEWS

Positive Real Estate Market Continues

All property market sectors are recording positive demand fundamentals, with in excess of 1 million sqm of commercial real estate due to be delivered in the next 18-24 months. 4

NE BUSI

SS

Kannan Prabhakar of Apollo Tyres Ltd., winner of the HIPA Partnership Award at the BBJ Expat CEO of the Year gala, explains how the Indian company has brought its “One Family” values to Hungary. 12 BUSINESS

A Solution to the Labor Crisis, at a Cost

With the labor shortage getting more acute, companies need to raise wages, but also improve productivity, which has been low in the past few years. Boosting investments and training is unavoidable, experts say. 6

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Budapest Business Journal | February 15 – February 28, 2019

THE EDITOR SAYS

EDITOR-IN-CHIEF: Robin Marshall EDITORIAL STAFF: Zsófia Czifra, Kester Eddy, Bence

Gaál, David Holzer, Christian Keszthelyi, Gary J. Morrell, Robert Smyth, Zsófia Végh, Zalán Zubor.

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It has been an odd couple of weeks, in which much seems to have happened, and at the same time nothing.

First there was the surprise news that Magyar Idők had rebranded as Magyar Nemzet. For the romantics with an eye for history, seeing that latter name on a masthead once again will be a welcome sight.

This, after all, was a conservative newspaper with venerable 80-year-history.

But it isn’t returning as an independent newspaper representing core right of center values. It is simply giving a relatively new publication, launched in September 2015 as a replacement for Napi Gazdaság and little more than a government mouth piece, a much more storied name. But it will still be heavily pro-Fidesz.

When it comes to the plurality of voices in Hungary’s print media, nothing has changed.

Elsewhere, Hungary has been criticized (again) for its actions in the human rights field. But as the source of that criticism was the Council of Europe Commissioner for Human Rights Dunja Mijatović, reflecting on a week-long visit to the country, that probably doesn’t come as much of a surprise to many people. And the criticism seemed pretty mild (“Hungary faces many interconnected human rights challenges,” a press statement sent to the BBJ reads), though it does go on to pinpoint a number of areas of concern.

Then there was the on-off visit of U.S. Secretary of State Mike Pompeo, who eventually came to town on February 11. Ahead of that, there had been suggestions from some quarters that the United States, a major trade partner with Hungary, was less than happy with certain elements of Hungarian policy making, particularly its friendly relationships with Russia and China.

Those claims were swatted down by the government as “fake news”, and instead the visit, the first of its type since was trumpeted by pro-government outlets as an endorsement of the Prime Minister.

“We’ll certainly make the case about the things that we see that we wish were different here,” Secretary Pompeo told an international press conference. “America is never shy about promoting its value set – our concern about humanitarian situations, about civil liberty, law – rule of law.” The question, as ever, is how selective Hungary will be in what messages it listens to.

After looking long and hard, I did find something that seemed genuinely new: While it has a way to go (and this is an area where countries are fighting a constant battle), Hungary is winning praise for aspects of its tax system.

As is made clear in our Special Report on the subject this issue experts say there are still too many taxes, and too much administration. Interestingly, speaking at the recent annual conference of National Tax and Customs Administration of Hungary (NAV), Minister of Finance Mihály Varga said cabinet wants to remain “the government of tax cuts” and also plans cuts in administration as well.

As one of our expert witnesses put it, tax avoidance is no longer a national sport in Hungary. Efforts to whiten the economy and improve transparency, at least in the area of taxation, have drawn praise. We’ll add our voice to that.

Businesses will always look to optimize their tax base, that’s just good business practice, but the cleaner and clearer the system, the more everyone benefits.

Robin Marshall Editor-in-chief

Photo: MTI/Zsolt Szigetváry

Photo: fortepan.hu/Sándor Bauer

The Budapest Business Journal, HU ISSN 1216-7304, is published bi-weekly on Friday, registration No. 0109069462. It is distributed by HungaroPress.

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READING THE RUNES FOR SOME NEW TUNES

THEN & NOW

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Ballet dancers from the Ballet Company of Győr perform a piece called “Passage”, based on Beethovenʼs “Seventh Symphony” in Budapestʼs National Dance Theater on February 12. The black and white picture from the Fortepan archive shows Hungarian ballet dancers practising in 1953.

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Budapest Business Journal | February 15 – February 28, 2019

News///macroscope

Core Inflation on the Rise, all Eyes on Rate-setters

With the latest inflation data having been released by the Central Statistical Office (KSH), we could see the start of a tightening cycle as early as in March, some analysts say.

Others, however, argue that the Monetary Council might consider a later start, as headline inflation is below the central bank’s target.

Core inflation, on the other hand, jumped to 3.2%, a surprise to analysts.

ZSÓFIA CZIFRA

Consumer prices were 2.7% higher on average in January than a year earlier, and basically remained flat from the previous month. Tobacco, alcoholic drinks, as well as food, were significantly more expensive in the first month of the year than a year earlier. The sharpest rise was in the price of tobacco products, with a 9.6% year-onyear increase.

The biggest surprise in the data lies in the core inflation data: that figure jumped to 3.2% in January, up from 2.8% in December.

Core inflation exceeded the mid-term inflation target of the National Bank of Hungary (MNB) of 3% for the first time in five years. Tax-adjusted core inflation, the central bank’s very own main core index, rose to 3% from December’s 2.9%.

After the latest inflation data was released, expectations that the MNB would start a tightening cycle soon were revived.

Such expectations seem quite wellgrounded, as just about a month ago, MNB deputy governor Márton Nagy claimed that the central bank could make a U-turn in its monetary policy if the core inflation measure reached or exceeded 3%.

Cut in Liquidity?

While most analysts still expect the central bank to maintain its key rate at the record

economist Tatha Ghose said. According to him, it would be “unimaginable” that the Polish or Czech central bank delayed an intervention in a similar situation.

However, he sees that the MNB prefers to take a “wait and see” attitude and deploys verbal interventions instead of actual moves. It is a risk to the MNB’s credibility and the forint. “One could not blame the market if it became nervous in the interim if inflation did not show signs of softening,” Ghose said.

In the meantime, Prime Minister Viktor Orbán has announced that he would propose current MNB governor György Matolcsy (a key ally whom the PM once described as his “right hand”) for a second term. Matolcsy’s six-year mandate will expire on March 3.

By law, the governor is appointed by the President of Hungary, based on the proposal of the Prime Minister, which is followed a hearing before a parliamentary committee. There is two-term limit for the position.

Numbers to Watch in the Coming Weeks Prime Minister Viktor Orbán has announced that he will propose György Matolcsy (pictured) for a second term as MNB governor. low level of 0.9% thorough the year, some think that the rise in the core inflation could soon lead to a cut in forint liquidity released by the MNB into interbank markets via its FX swap facility and an increase in the short-term BUBOR rates.

According to analysts at Bank of America-Merrill Lynch, the MNB will start a tightening cycle gradually, as it does not want to fuel a significant strengthening of the forint against the euro. As they put it, Hungary’s central bank is “not comfortable in periods when the forint strengthens below 310 against the euro, and at around 305 HUF/euro level it is likely to act pro-actively”.

Therefore analysts at BofA believe that, if the Hungarian currency strengthens too fast or goes too far, the MNB might slow down normalizing its monetary policy.

External factors, such as trade conflicts affecting the European automotive industry and the weakening of the eurozone economies indicates that the MNB will choose a slow and gradual path.

As a first step, the central bank might cut back its FX swap tool and, at the same time, it might increase its short-term BUBOR rate. The BofA, however, does not exclude the possibility of a base rate rise at the end of the third quarter or in the fourth quarter of this year.

According to Morgan Stanley economist Pasquale Diana, taking into account the underlying inflationary pressure shown by the increasing core inflation makes it clear that the question is not whether

the MNB will launch a tightening cycle, but rather it is when it will start.

Start of Normalization

Diana said that Morgan Stanley does not rule out a March date for the start of the normalization, adding that it is more likely that it will be gradual.

It is clearly seen that the core inflation index has risen steadily in the past months and also at a faster pace than in neighboring countries, Commerzbank ADVERTISEMENT

A second reading of the retail trade data for December and for the full year of 2018 will be released on February 21. The Central Statistical Office will publish data on the labor market, referring to the NovemberJanuary period, on February 22.

But before that, on February 15, credit rating institute Standard & Poor’s will review Hungary sovereign debt rating; it is the first of the six reviews scheduled for this year by the three large credit rating agencies.

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Budapest Business Journal | February 15 – February 28, 2019

Positive Fundamentals Expected to Continue All property market sectors are recording positive demand fundamentals, with in excess of one million sqm of commercial real estate currently under construction and due to be delivered in the next 18-24 months, commented Lóránt Varga, managing director of CBRE Hungary, at the 2019 Re-View by CBRE at the Urban Betyár restaurant.

GARY J. MORRELL

The annual event was attended by real estate professionals and clients of the consultancy. CBRE presented overviews of the office, retail and industrial markets from a development and investment perspective, alongside predictions for 2019, based on data compiled by CBRE. Looking at the economic background to market activity, 3.7% in GDP growth is predicted for Hungary by the OECD for 2019, and Hungary has tended to record an upside of around 1% on economic predictions, according to Gábor Borbély, director of business development and

complexes on the Germany model.

There are already some signs of this in Poland and such investments are seen as being 12-18 months behind in Hungary.

O’Sullivan described Hungary as following Czech Republic in the development cycle: a low supply of investment assets is restricting investment activity and much of the investment grade stock has already traded within the current cycle.

CBRE has calculated that Hungarian funds represented

65% of

Lóránt Varga presents CBRE Re-view 2019. research at CBRE Hungary. Hungary’s labor shortages remain a problem for economic activity.

Around EUR 1.7 billion in commercial real estate transactions were concluded in 2018, and an

estimated

EUR 1.5 bln

in investment volume is predicted for this year. The represents “stable and continuous investment for the third year”, said Tim O’Sullivan, head of investment properties at CBRE Hungary.

The number of transactions in the office market is expected to rise; however, this will mainly be for smaller lot sizes worth around EUR 50 million. With regard to retail, most of the top ten Budapest shopping centers have been traded and there will be low liquidity in this sector.

CBRE expects both the office and industrial markets to perform similarly to last year, with the notable changes coming from the retail and hotel sectors.

“Over the last few years at least one or two of the major, prime shopping centers have traded, but we do not expect this trend to continue into 2019,” commented Ben Barclay, senior investment consultant at CBRE. “This reduction in retail volumes, will be offset by the increasing volumes of hotel transactions, as we continue to see more international, core capital targeting the hotel sector,” Barclay added.

Investors are, therefore, considering alternatives to the established market sectors, such as hotel, where two transactions are ongoing and there are a further four or five hotels that could be on the market.

The German Model

Another possible investment target is residential with the acquisition of large

the purchases last year, followed by South African investors.

“Foreign investors such as South African investors and the returning Austrian investors are competing with the Hungarian funds for assets,” O’Sullivan said.

Office yields are estimated at 5.75%, although these are viewed as being under pressure, and a least ten assets could test this figure if they became available. The 5.75% yield for industrial properties could also be tested, with the pressure to buy on investors. Yields for prime retail assets are put at 5.5%, although, as mentioned above, the leading shopping centers are not expected to trade.

When it comes to the Budapest office market, supply reached 230,000 sqm compared to demand of 536,000 sqm for 2018; 40% of take-up was in the Váci Corridor with the inner part of the submarket particularly busy.

Budapest has an office pipeline of circa 500,000 sqm. “As a result of the strong demand in the market, the average vacancy rate in Budapest has fallen to 7.3%. Tenants need to make a quick decision in order to secure quality space,” said Judit Varga, head of office advisory at CBRE Hungary.

Horizon Development Agrees Financing for Szervita Square Horizon Development has signed a financing agreement with UniCredit Bank Hungary for the development of the mixed-use, 15,000 sqm Szervita Square. It has also concluded an 8,500 sqm pre-lease with Spaces for the four levels of office space in the mixed-use complex.

GARY J. MORRELL

The project is a rare development in the central District V where it is becoming increasingly difficult to source development sites. The development is owned by the SZ8 Real Estate Development Investment Fund, which is in turn

100% owned

by Horizon.

Szervita Square will be the first project where IWG Hungary (the concept owner

of Spaces and Regus) introduces its coworking workspace concept on a largescale in Budapest.

The LEED “Platinum” certified development will consist of retail space on three floors (-1, mezzanine and ground floor), office space on floors one to four and luxury residential units on the 5th and 6th floors. The seven-story structure is designed to fit organically into the historic setting of Hungarian art nouveau buildings in the heritage protected area of the city. A park in front of the building is designed to provide a public space for the area.

Final Agreement

“We are glad to have achieved a final agreement with UniCredit Bank Hungary regarding the financing of our ongoing prime development,” said Attila Kovács, managing partner of Horizon Development.

“With all four office floors already dedicated to accommodating the space requirement of our tenant, Spaces, as well as the currently experienced strong demand for the retail and luxury residential units of the property, we have no doubt that the final numbers will confirm our development ambitions, as well as UniCredit Bank Hungary’s decision to entrust the project,” Kovács said.

Gábor Pető, real estate financing director of UniCredit Bank Hungary, added: “As a leading bank in real estate finance, UniCredit is proud to be involved in the best development projects as a financing partner.

After two previous successful co-operations, Szervita Square

is our third project with Horizon Development.”

Structural works on Szervita Square are expected to be completed in the first quarter

of

2020,

and the fit-out is scheduled to be concluded the fourth quarter of 2020.

Szervita Square by Horizon Development.

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Budapest Business Journal | February 15 – February 28, 2019

Sun Still Shines on Hungarian Economy, but Clouds Gather In its latest economic survey of Hungary, the Organization of Economic Cooperation and Development (OECD) paints a very positive picture of the country’s recent economic performance, though it warns of pitfalls and serious challenges ahead.

GDP per capita is converging to the OECD average, though slowly GDP per capita gaps to the upper half of oecd countries. Upper half is weighted by the population.

0 -10

Hungary

Czech Republic

Poland

Slovak Republic

-20 -30 -40 -50

-60 -70

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: OECD (2018), Going for Growth.

KESTER EDDY

When it comes to praise for Hungary’s economic performance and policies, it doesn’t get much better than that from Alvaro Pereira, Director of Country Studies in the OECD Economics Department.

“It’s fair to say that Hungary stands out as one of the best performing economies in the OECD in 2018,” he said when presenting the Paris-based institution’s latest assessment of Hungary in Budapest on January 31.

“If you want a headline for this survey, Hungary has been outstanding in terms of performance in the OECD, so well done!” he effused.

The Portuguese economist, forecasting

3.9% GDP

growth this year, went on to “congratulate the government for continuing to take action to tackle

some important issues”, noting the administration’s efforts to broaden the tax base while introducing a flat-rate, personal income tax of 15% and slashing the corporate levy to a single-digit 9%.

Inevitably, given the nature of economic developments, there are potential pitfalls ahead.

“Watch out!” Pereira warned, because the slowing world economy is likely to lead to weaker export demand. Rising wages within Hungary are also adding to inflationary pressures, and if not matched by productivity improvements, could damage the country’s competitiveness.

“Wages have been growing at double-digits for the last two years, and it’s important because there is still way to catch up compared to the other Visegrád countries, [….] but if they grow too fast for too long, they

might affect external developments, and they might have an impact on your whole economy,” he cautioned.

Left Behind

Some areas and income groups have also missed out on the economic recovery.

As an example, Pereira pointed to the success of Budapest and northwestern Hungary in attracting foreign direct investment, but as a result of this concentration, “many poorer, rural regions, have been left behind, as their economic activity does not allow them to integrate into local or national supply chains”.

Indeed, this process has led to a two-speed economy and a widening divide between the “have” and “havenot” regions, and the government needs to boost what he termed the “spill overs”, meaning the transfer of skills, know-how and technology from

Independent Domestic Economists More Downbeat Than OECD In line with the OECD findings, a panel of domestic economists and financial experts, speaking to foreign journalists on February 11, hailed the recent success of the Hungarian economy and noted some of the same resulting weaknesses and disparities.

However, in contrast to the Parisbased institution and its envoy, Alvaro Pereira, the panel attributed this success more to external factors rather than government policies, and, in the wake of the 18% wage award to Audi workers at the end of January, expressed more concern about the resulting inflationary pressures and loss of competitiveness.

“The Germany economy, so long as it holds up, underpins the Hungarian export sector; credit growth is strong, household consumption is strong, wage growth is strong and, first and foremost, EU funds are flooding into

Hungary,” Tamás Simonyi, senior director and head of CEE Financial Institutions M&A Advisory with KPMG in Budapest, said, adding: “I can’t really recall such extremely advantageous and comfortable external conditions for the Hungarian economy in my lifetime, which didn’t start yesterday.”

Zoltán Török, head of research at Raiffeisen Bank, stressed that, good as it is, the recent Hungarian economic performance is far from unique across the region.

“Not only the Visegrád countries, but also [in] Serbia, Croatia and Bulgaria, Romania, you see very similar developments. So, relatively strong growth, the external accounts are mainly positive, and unemployment rates are also at record low levels,” he noted.

Indeed, given that from around 2005 to 2014 wages generally stagnated in Hungary, growth in recent years has been long overdue.

“Hungary does not [only] need to converge to Western European wages, but first to Central European and Visegrad countries,” he said.

EU Role

András Vértes, chairman of the GKI Economic Research Institute, returned to the issue of European Union funding, stressing its importance in bolstering the economic recovery in Hungary.

(Surprisingly, the OECD survey barely mentions the role of EU funding.)

“Hungary got from the European Union in net terms EUR 3 billion per annum over the current seven-year [EU funding] period,” Vertes said, adding: “This is 2.5% of GDP. Very high numbers. Practically, Hungary got more EU funding than all other Visegrad countries on a per capita and GDP basis.”

But this is set to be cut to between EUR 1.5 bln-1.7 bln net per

efficient, productive foreign-owned companies to domestic operations.

“Making the domestic producers stronger, with a comprehensive SME strategy, is very important for Hungary, and it’s very important for boosting productivity [country-wide],” he said.

Along with the need for more inclusive growth policies, Pereira emphasized that the survey dealt in depth with the issues of ageing and the problem of funding healthcare and pensions.

Hungary faces “at least a

50% increase”

in ageing costs, he warned, declaring that without reform policies the current system “is not sustainable”.

An overview of the 2019 OECD survey on Hungary is available at the OECD website (oecd.org).

annum for the next funding period, beginning in 2021.

While the final figures have yet to be agreed, according to Vértes, the transfers “will not be too much from these numbers, ... so, [just] 1.5% of GDP”.

This will result in “important questions for the Hungarian economy”, he said.

Vértes also had blunt words on recent wage trends. “There are problems with very high wage increases in Hungary; 8-10% real wage increases based on 4% GDP growth is too much, it’s impossible to maintain this long-term,” he said.

Both Török and Vértes are more pessimistic on GDP projections than the OECD, with Raiffeisen forecasting 3.5% growth this year and 2.2% in 2020 – versus the OECD’s 3.9% and 3.3%.

As Vértes put it: “After 2020, growth will be lower. Nobody knows exactly, but the situation will worsen very strongly.”

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Business

Increased Productivity Offers Solution to Labor Crisis, at a Cost With the labor shortage getting more acute, companies need to raise wages, which they can ultimately do by improving productivity, something that has been rather low in the past few years. To improve it and to make sure Hungarian companies do not fall behind, boosting investments and training people is unavoidable, experts say.

ZSÓFIA VÉGH

Productivity is a cyclical phenomenon.

It decreases during recession, when GDP falls, and then it stagnates in early recovery, when growth is fragile, and labor is cheap and abundant. However, productivity tends to grow faster in boom

Gergely Tardos times, when GDP growth is strong and companies cannot hold onto workforce, so they have to invest in order to keep up with the rising demand.

Between 2013 and 2016, Hungary’s annual GDP growth averaged 3.3%, but owing to the dynamic expansion of employment, productivity has remained stagnant. In the 2013-2016 period, employment also grew by 3.3% on average (or by around 2.5% if we exclude the effects of Hungarians

working abroad and those on public work schemes).

In 2017 and 2018, GDP growth rates reached 4% and 4.6% respectively, while annual employment growth slowed to 1.5%, so productivity growth jumped to

approximately

3%.

This rate is likely to remain until 2020, by which time employment growth will likely stop entirely as the remaining labor market reserves are depleted, Gergely Tardos, chief economist of OTP Bank tells the Budapest Business Journal.

This has two main factors. The first is rising demand, especially domestic, which has brought back economic confidence and pushed capacity utilization higher in domestic demand-driven industries. The second is unemployment, which has fallen to all-time lows.

These factors have increased companies’ willingness to invest as labor becomes more expensive. “Looking ahead, though, alongside public investments, private investment also started to pick up in 2017 and 2018,” Tardos says. “As the workforce is getting scarce, companies need to raise wages, for which they need to increase their efficiency by boosting investments.”

Productivity also depends on the industry, management skills, the technology applied. “Exporting companies have been able to operate profitably, whereas companies meeting domestic demand, for example construction and telecom companies, were more severely and longer impacted by the crisis,” Tardos adds.

Capital Intensive

These latter companies started to grow stronger as domestic demand began to grow. Hungarian SMEs are less capital intensive than larger firms or multinational competitors that are under more pressure

to remain competitive, but can also pay more. The productivity of foreign-owned companies can be three times higher than that of domestic controlled companies – almost the highest rate in the EU, the expert notes.

The productivity gap between smaller and larger Hungarian companies is also one of the highest in the EU. These two factors suggest that Hungarian SMEs face serious competitiveness problems. Many have taken advantage of tax evasion for years and had only modest willingness to invest in growth.

This duality can be sustainable only for a while and many of the government’s antishadow-economy measures (online cash registers, electronic road haulage control system, real-time VAT returns, reducing fiscal burden on labor, etc.) have already improved the situation.

Also, the generation of entrepreneurs who started their business just after the political transition is now retiring.

SMEs are facing labor shortage and wage competition that, eventually, could somewhat shrink the gap between them and large/multinational players, Tardos explains.

“Productivity in Hungary is relatively low because there is an enormous gap between high-productivity (mainly multinational) large companies and domestic SMEs; larger than in countries with similar potential or any other country in the region,” explains Éva Palócz, CEO of Kopint-

“On the one hand, we have excellent startups with digital solutions and apps that are outstanding in worldwide comparison; on the other, many low-productivity enterprises don’t even have a webpage and never use the internet in their business.”

Tárki Zrt. The key to raising average productivity is if this group of firms gets to improve productivity.

According to Palócz, it is yet to be seen what effect recent changes such as fast-paced wage growth will have on productivity.

Replacing Workers

“Even if we deduct the effects of economy whitening, wages have increased significantly, at least 8-10% during

the last two years, exceeding multiple times the rate of productivity standing at around 1-2%.” All this might lead to companies starting to invest in technology that can replace workers, Palócz says.

Based on this year’s data, it will be possible to tell if the rapid wage growth that started in 2016 has helped improve average productivity or rather has led to a massive education in the number of small companies, Palócz says.

Bad as it may sound, if less productive micro and small companies are closing, that does improve the average productivity of Hungarian companies overall.

Productivity in Hungary is

approximately

60%

of that of the European Union average, so a few percent improvement in productivity would result in reducing the effects of the chronic labor shortage, she adds.

Éva Palócz However, investment in more productive technologies is a key factor for improving productivity: it is all the more important to develop and educate the workforce, which should be able to handle these advanced tools.

New technologies are not only capital intensive but also human resource intensive. As a result, education and retraining is becoming crucial: a selfdriving tractor may replace several farmhands, but it also requires someone well trained to operate it.

The profitability of Hungarian companies is not bad in general (based on latest available data from 2016).

“Thus a large part of companies would be able to finance, at least partly, smaller investments and banks are keen to lend money for sound projects,” Palócz reckons. Interest rates are historically low, so funding such investments is now easier than finding qualified workforce, she adds.

When it comes to digital development and the services sector, the situation is rather diametric.

“On the one hand, we have excellent startups with digital solutions and apps that are outstanding in worldwide comparison; on the other, many lowproductivity enterprises don’t even have a webpage and never use the internet in their business,” Palócz notes.

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Business

|7

AutoWallis Plans Regional Expansion After BSE Listing Hungarian asset manager and automotive holding AutoWallis Nyrt. plans to double its revenues and carry out acquisitions in Central and Eastern Europe over the next five years, after listing its shares on the Budapest Stock Exchange on February 7.

VERONIKA GULYÁS

AutoWallis, part of the Wallis Group, will be traded in the “Standard” category on the floor and plans to meet all of the five requirements to be part of the benchmark BUX index as soon as possible.

AutoWallis Nyrt., formerly Altera, generated revenues of HUF 70.2 billion in 2018,

up

5.9%

on the year, which makes it the seventh largest company on the Hungarian bourse in terms of revenues. The IPO is expected to attract public capital market resources for financing AutoWallis’ growth plan, the management said at the event.

“Members of Wallis Group have so far proved they are not letting down their investors; AutoWallis will surely be joining this line of successful listed companies,” Richárd Végh, head of the Budapest Stock Exchange said at the official event marking the initial listing.

Top Brands

AutoWallis, founded in 2012, has four member companies in the retail and wholesale of vehicles, their parts and accessories, repair and maintenance services, as well as in short- and longterm vehicle rentals in Hungary and in the Central and Southeastern European region. Brands represented by the group include BMW cars and motorbikes, Mini, Isuzu, Jaguar, Land Rover, Maserati, SsangYong, and Sixt Rent-a-car. BMW holds a dominant position in the premium car market, while Sixt is leader in car rentals in Hungary.

In a breakdown by members, Wallis Automotive Europe saw revenues

of

From right to left: Richard Végh, BSE president and CEO; Tibor Veres, president of the Wallis Group, the majority owner of Auto Wallis Plc.; Zsolt Müllner, chairman of the Board of Directors of Auto Wallis Plc.; and Gábor Székely, chief investment officer of Auto Wallis Plc. The event, which traditionally begins with the newly listed company’s leader ringing the opening bell for trading, took place after preparatory work that had lasted almost half a year and involved a so-called reverse takeover deal, Tibor Veres, chairman of the Wallis Group said at the event.

Engaging Story

“We are pleased to have seen the great interest in the IPO over the past few years,” Veres said at the press conference following the listing event. “We pledge to provide an engaging story to our investors, creating the possibility to invest in the car industry in Hungary.”

The firm’s shares were listed under the code name AUTOW at a nominal value of HUF 12.5; the number of the shares is now 270.26 million.

Besides inclusion in the BUX index, AutoWallis aims to be included in the CECE composite index of the Vienna Stock Exchange, and upgrade to the “Premium” category on the BSE as soon as possible. The current owners intend to preserve their majority interest in the long run, establishing a significant but minority free float on the market of AutoWallis shares, Veres said.

As for plans, AutoWallis aims to present a long-term strategy this spring, pay an “attractive” dividend on its common shares in 2020, and to double its revenues over the next five years.

Growth will likely be fueled by rising Hungarian demand, and the company entering the Balkan markets, Gábor Székely, the chief investment officer of AutoWallis said. Last year, half of the group’s revenue came from abroad, primarily on the back of acquisitions made in 2016 in eight countries in the Balkans.

On top of setting foot in the Balkans, Wallis Automotive Europe, the largest revenue-generating member of AutoWallis, entered the Czech and Slovakian markets in 2018 with the South Korean SsangYong brand, which Székely expects could further boost revenues

by

5-10%

over the coming two-to-three years.

“Further increase in revenues [for the whole group] are likely on the back of the expansion of the Hungarian economy, the dynamic development trend of tourism, rising average wages and consumption, and with willingness to borrow also gaining momentum,” Székely said.

HUF 35 bln

in 2018; Wallis Motor Pest and Duna, the two largest dealerships handling BMW cars and motorbikes, Mini and Maserati brands, increased their joint revenue by 19% to HUF 32 bln last year.

Wallis Autókölcsönző, a company offering car rental services as the Hungarian member of the international Sixt Rent-a-car network, is expected to have increased revenues by 23% to HUF 2.7 bln in 2018, preliminary figures show.

Wallis Autókölcsönző is also market leader in airport car rental services, and foresees the growing number of travelers flying into Hungary and the inevitably increasing passenger traffic at Budapest Airport as having a positive effect on performance.

AutoWallis has its eyes peeled for investment opportunities in Hungary, Eastern Europe, and the Balkans, acquiring new brands and markets, as well as getting involved in new lines of business.

“Our existing brands are of special importance. We would like to introduce brands in countries where we are already present but the brands are not,” Zsolt Müllner, member of the board at AutoWallis said.

Medium-term plans include opening further vehicle distribution points, and developing the existing dealership and service network in Hungary, as well as in the region. The group is also keeping the ongoing industry transformation under scrutiny, with developments in the fields of electric vehicles, self-driving cars, and car-sharing in focus.

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2019. 01. 25. 16:52

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No WeChat, no Business in China Our headline would be the shortest, although in truth far too simplistic, summary capturing a twoday program of presentations, panel discussions and interactive dialogue at the “marketing to China” (m2C) conference on leading the way to Chinese consumers, which took place from January 29 to 30 in Prague.

The event brought together close to 200 professionals interested in gaining fresh insights on the Chinese market, digital ecosystem and social media. There were 28 nations represented by the participants, from the United States to New Zealand, and from Iceland to Greece. The conference provided a valuable networking opportunity and set the stage for further cooperation among brands and agencies in Europe and beyond.

The conference began with opening keynotes from Bo Ji, Matthew Brennan and Michael Norris and continued with an interactive Experts’ Panel discussion, moderated by Jan Smejkal, the founder of The Dinner project.

Participants of the panel represented both European and Chinese entities, providing products and services necessary to successfully promote and sell in China: Annemarieke Kostense from Wirecard; Guillaume de Roquefeuil, CEO of EuroPass; and Marco van Eersel, managing director of WeRetail.

The afternoon was packed with presentations and briefings on topics related to Chinese marketing strategies, technics and tools. It concluded with a masterclass delivered by Ashley Galina Dudarenok, who introduced participants to the most important e-commerce platforms in China. It was also a great opportunity to get Dudarenok’s signature on her book, “Unlocking the Biggest E-market”, which has become an Amazon bestseller The second day of the m2C Conference was dedicated to hands-on workshops, case studies and training. Among the concurrent morning sessions, Matthew Brennan explained how brands could benefit from introducing the newest functions of WeChat, the Chinese super app, which is used by more than one billion Chinese citizens monthly.

Most “Sexy”

Fabian Bern, co-founder of UpLab, explained why Western companies should consider Douyin as an important part of their marketing mix for China; Douyin is currently the fastest growing and the most “sexy” mobile app in China.

With Chinese outbound tourism the biggest in the world, participants at “Marketing to China” could listen to case studies from agencies and brands that have successfully entered Chinese tourism market. It is not just about promotion and brand creation before

Ashley Galina Dudarenok the trip, but also how to communicate with Chinese tourists and meet their expectations while they are already in Europe.

All speakers highlighted the critical role of the availability of Chinese payment methods and the possibility of offering Chinese native mobile apps.

Here is how one of the conference’s participants summarized the event: “China is digitally much more advanced than we are in Europe, both from a technical point of view as well as the mindset. There is a large gap also from the knowledge and understanding point of view. and we need to continue to inform and educate. […] We should have an open mind when looking at China.”

Th “marketing to China” conference in Prague was very well received by participants, sponsors and speakers. All of them clearly stated that there was a big niche on the educational market in regards to Chinese marketing and this event perfectly fulfilled all the expectations.

Following demand from the market, the next edition of m2C event will be held in London, in the beginning of June.

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WHO’S NEWS

Business | 9

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

Dreher Names Marketing Manager for Int’l Brands

From January onwards, Rita Hruska has been responsible for the marketing of international brands distributed by Dreher, such as Asahi, Pilsner Urquell, Kozel, HB, and Kingswood, the brewer said.

Hruska began her career at British American Tobacco, after obtaining a degree in marketing and economics from the International Business School, working on building premium brands and the introduction of several successful products, while also focusing on modern marketing solutions.

Afterwards, Hruska worked at coffee retailer Tchibo as brand manager, focusing on strengthening the market-leading position of the company’s most important product. She joined Zwack Unicum in 2009, first directing the Johnnie Walker brand before taking over the marketing team of the Unicum brand itself.

Over the course of her career at Zwack, she also represented international brands such as Moët & Chandon, Hennessy, Evian, Baileys, and Captain Morgan. In recent years, she was mostly responsible for the communications of Hungarian brands, as well as the introduction of new brands and product developments.

“Brands with a long-standing tradition have always been close to me,” says Hruska. “At the 165-year old Dreher Brewery, we will enhance the recognition of our brands with innovation and experience-marketing, besides genuinely presenting the rich heritage.”

Jalsovszky Announces Partner, Organizational Changes

Hungarian law firm Jalsovszky has named attorney Tamás Fehér a partner, and announced that its litigation team began operating as a separate practice group this January.

“When forming this practice, we relied on the routine and expertise gained through our market-leading tax litigation practice as well as on the experience

and knowledge we have acquired in civil lawsuits conducted in the previous year,” managing partner Pál Jalsovszky says.

“We find that the new Civil Procedure Code, which came into force last January, creates a level playing field among attorneys: it does not really matter anymore how many years of experience someone has, but rather who can adapt to the new laws.”

As a tax and litigation specialist, Fehér will be responsible for the supervision and direction of the new litigation team.

“When I interviewed Tamás four years ago, I saw not only a capable tax professional, but also someone with exceptional social values,” says Jalsovszky. “I am glad that he has been able to develop his skills further with us, and to become one of the leading lights of the firm. I am confident that he will also manage the challenges of his new position with finesse.”

LG Electronics Hungary Appoints Chief

2nd district

2nd district

82 sqm – 3 rooms+ Hall, kelemen l. sTr.

95 sqm – 2 rooms, BUday lászló sTreeT

This completely renovated, very sunny apartment has 37 sqm of terrace, panoramic view over the Buda Hills and it is situated within a Bauhaus style building with well kept common garden.

This spacious, garden facing apartment benefits of separate rooms, 10 sqm of balcony, private gas heating and it is situated within a condominium with nice garden.

Beautiful view over the Parliament, this very sunny apartment in good condition benefits of separate rooms and private gas heating. It is located in a quiet and green area.

52.600.000 HUF

63.500.000 HUF

84.900.000 HUF

+36.1.336.1706

2nd district

+36.1.376.6080

2nd district

+36.1.336.1706

3rd district

134 sqm – 3 rooms, kavics sTreeT

144 sqm – 4 rooms, Törökvész sTreeT

From 44 sqm To 91 sqm, rómaiFürdő

This very spacious and bright, garden facing duplex apartment has two bathrooms, private gas heating, balcony and terrace. It is situated within a nice villa house, in a green area.

Panorama over the Buda Hills, this very spacious apartment in good condition has separate rooms, wardrobe room, balcony and private garden. Garage possibility for 8.000.000 HUF.

Close to the Római Open-air baths, four apartments within a new built, eco-friendly building.

Garage possibility for 3,5 M HUF, parking space for 1,5 M HUF. Handover in autumn 2019.

93.500.000 HUF

112.000.000 HUF

998.000 HUF/sqm

+36.1.336.1706

3rd district

Hyeong Tae Kim takes over the position at the helm of LG Electronics Hungary from Bumseop Lee, who will continue as the president of the Korean company’s British subsidiary, according to the firm.

As LG Electronics’ Hungarian subsidiary acts as a regional center, the new head will also be responsible for the coordinated commercial activity of ten further countries in the SEE region: Albania, Bosnia, Bulgaria, Croatia, Kosovo, Macedonia, Montenegro, Romania, Serbia, and Slovenia.

Kim started working at LG in 1992, first gathering experience on the Asian market before moving on to the North American region, where he worked for 20 years. In the United States, he was responsible for the market introduction of the innovative OLED TVs as the product director of LG’s entertainment electronics segment. Before coming to Hungary, he coordinated the company’s Czech and Slovak operations as regional managing director.

“I am very glad that I can continue working at LG as the head of such a diverse region,” said Kim. “All of the SEE markets have a different past and different culture, therefore it is an exciting task to introduce LG’s newest premium products in such a diverse market. As a pioneering company, we place great emphasis on applying AI, in all of our household and entertainment electronics, mobile communications, air conditioning, and IT solutions branches.

I believe that we are creating real value with continuous innovation for our customers in the region and beyond.”

2nd district

44 sqm – 1 room, Torockó sTreeT

+36.1.376.6080

3rd district

+36.70.669.5350

5th district

From 63 sqm To 102 sqm, rómaiFürdő

140 sqm – 5 rooms, csillaGHeGy

47 sqm – 1 room, Balassi BálinT sTreeT

Four apartments for sale within a new built, eco-friendly condominium, close to the Danube. Garage possibility for 3,5M HUF, parking space for 1,5M HUF. Handover in autumn 2019.

This spacious, two storey semi-detached house in good condition has two bathrooms, two balconies, nice garden and a two car garage. It is located in a quiet and green side street.

Close to the Jászai Mari Square, within a nice period building with elevator, this spacious, quiet apartment in good condition benefits of a sleeping gallery.

998.000 HUF/sqm

69.900.000 HUF

44.900.000 HUF

+36.70.669.5350

6th district

+36.70.669.5350

7th district

+36.1.351.0446

11th district

52 sqm – 2 rooms, szondi sTreeT

59 sqm – 2 rooms, damjanicH sTreeT

76 sqm – 2 rooms + Hall, krUsPér sTreeT

This very well divided, sunny, street facing apartment in good condition has separate rooms and private gas heating. It is situated within a well maintained building, close to the Heroes’ Square.

In a very nice period building, this sunny, street facing apartment, that needs renovation, has private gas heating and it is located close to the City Park. Good connection to public transport.

In a well maintained building with elevator, this quiet, street facing, high floor apartment in good condition has private gas heating. It is located in a quiet area.

44.900.000 HUF

36.900.000 HUF

56.900.000 HUF

+36.1.351.0446

11th district

+36.1.351.0446

11th district

+36.1.720.2433

12th district

240 sqm – 10 rooms, kelenFöld

1000 sqm – 6 rooms, PéTerHeGyi sTreeT

104 sqm – 3 rooms, GalGóczy sTreeT

This new built, two storey detached house has 640 sqm of lot, 3 bathrooms, balcony, terrace and garage. 90% of the house is built.

This new built, three storey, minimalist style villa house has panoramic view over the Buda Hills, benefits of terraces, elevator, swimming pool in the garden and garage.

In a new built subdivision, this very sunny and spacious apartment benefits of a fully fitted kitchen, large living room, bedrooms with balconies, terrace and a two car garage.

155.000.000 HUF

590.000.000 HUF

122.000.000 HUF

+36.1.720.2433

13th district

+36.1.720.2433

13th district

+36.70.376.4138

13th district

48 sqm – 2 rooms, kresz Géza sTreeT

75 sqm – 3 rooms + Hall, aliG sTreeT

107 sqm – 3 rooms, Pozsonyi sTreeT

In a nice, Bauhaus style building, this street facing apartment in good condition has separate rooms and private gas heating. It is located in a quiet area.

In a quiet side street, this very well divided, street and garden facing apartment has separate rooms and private gas heating. It is situated within a Bauhaus style building with elevator.

View over the Danube, this well divided, sunny, high floor apartment in good condition has private gas heating and large balcony. It is situated within renovated period building with elevator.

34.900.000 HUF

45.900.000 HUF

89.000.000 HUF

+36.70.414.7759

+36.70.414.7759

+36.70.414.7759

GrUPPo T.F.m. kFT. 1068 BUdaPesT, király U. 102. each agency independently owned and operated. • these offers are valid, till the apartments are sold. • these information do not constitute a contractual element.

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Budapest Business Journal | February 15 – February 28, 2019

The OECD, Hungary and Threats Posed

by Lifeless Ruminants As reported on Page 5, the OECD, the Organization of Economic Cooperation and Development, released its latest economic survey on Hungary at the end of January.

KESTER EDDY

While not exactly bedtime reading, these publications are a treasure trove of facts and information on the target country: at 180 pages, its text is liberally interspersed with graphs, tables and statistics, The latest on Hungary offers insights on subjects as diverse as the number of avoidable hospital admissions to the export share of wine production. (For the record, Hungary scores poorly on the latter, and appallingly on the former.)

Of course, at their core, these surveys provide a comprehensive overview of economic policies and issues that comprises the daily diet of business journalists, so the press conference invitation for the launch of the 2019 edition provoked a quick and positive response.

Alvaro Pereira, OECD Director of Country Studies, gave what could be termed the keynote address, a synopsis of the survey.

As reported, the Portuguese economist lauded Hungary’s recent economic progress, highlighting the growth figures, salary trends, the record employment data, foreign investment: tax policy, specifically the 9% corporation tax and 15% flat-rate personal income tax, received special praise.

Pereira did note challenges, including the risk of inflationary pressures, the disparities between the haves and have nots, and funding problems for healthcare and pensions, but it was clear that journalists from government-friendly media would have no problem making their word count.

Left Unsaid

For what was striking was what was unsaid: for a start, the European Union, which has

M LIN E O T T O B E H T provided HUF 3 billion in net funding every year since 2013 to support the Hungarian economy, received no acknowledgement whatsoever in Pereira’s overview. (It is barely credited in the full report.)

Further, in his appraisal of tax policy, Pereira omitted to mention a clutch of government “reforms” that contradict stated OECD goals. For example, while highlighting the hapless condition of the state pension system and stressing the need for sustainable reform, he ignored the 2011 legislation which destroyed the mandatory funded pillar.

And when gushing praise on tax policy – and to advocate more-inclusive policies to help the poor ten minutes later – he forgot to mention that the introduction of the 15% flat rate PIT was accompanied by the elimination of the 0% bracket, leaving lower income groups worse off.

But there was an even more glaring omission that no serious assessment of the Hungarian economy could possibly ignore: nowhere in his 28-minute address did Pereira allude to corruption and resultant economic damage; this despite a plethora of evidence compiled by investigative reporters and institutions such as Transparency International on all governments since the fall of communism.

Moreover, unlike previous OECD presentations, the “press conference” was closed, with no public media questions.

Asked to explain the lack of reference to corruption, Pereira replied: “You can see it in our power point presentation: in every single survey of the OECD we highlight this issue.” Why then, did this slide not feature in his presentation?

“Because I was focusing on longterm challenges, the regional focus and pensions,” he said.

The OECD’s “core values” include the pledge to be “bold”. Bold? Pereira’s presentation reminded this correspondent of the deceased British politician Denis Healey, who, after criticism by the mild-mannered Geoffrey Howe in parliament, commented: “It was like being savaged by a dead sheep.”

head in the clouds of long-term thinking.

BBJ: Any special attributes about Invitech’s presence in Hungary?

DB: Telecommunications is a dynamic industry, and Invitech has transformed itself as the industry has evolved, from primarily a telephony-based company in the early days, to ultra-high-speed connectivity and nowadays the converged worlds of cloud computing, IT operations and telecommunications networks.

It is an exciting industry.

The Bottom Line is a monthly column written

by Kester Eddy, a long-standing and well respected Budapest-based business and economic journalist, who has written for the Financial Times and many regional publications. The opinions expressed in the column are not necessarily those of the Budapest Business Journal. To comment on this column, or on anything else in the BBJ, email the editor at robin.marshall@bbj.hu

PRESENTED CONTENT

BMW CEO Experience DB: Whilst the G-Force measure certainly enhanced the rocket-like experience, I would have to mention the small details, like touch sensitive seat controls.

BBJ: What kind of driver would you consider yourself to be?

DB: I am a conservative driver, probably one too boring to test the full limits of the X5M! BBJ: Would you recommend the X5M as a business or family car, or both?

DB: The car is plenty big enough to handle the family and related stuff, without being overly ostentatious.

BBJ: What did your family think of the car?

DB: The kids’ favorite feature was the massive display screen and navigation app, what else?

With David Blunck, Invitech ICT Services.

BBJ: How did you like the car overall?

David Blunck: The car was fun to drive.

The X5’s solid performance and attentive design is par for the course for BMW. What made the experience special was the sport package, which, as much as KRESZ [the Highway Code] allows, of course, made for a powerful ride.

BBJ: What was the most surprising or most useful feature?

BBJ: Would it suit an executive fleet?

DB: BMWs are always a safe choice for an executive fleet.

BBJ: Where did you take it and why?

DB: I wanted to test the car in a demanding, rough environment. The tough “urban jungle” of Budapest streets was the perfect testing ground: full of hazards and predators!

BBJ: What kind of manager would you describe yourself as?

DB: I have my feet solidly on the operational ground, but with my

BBJ: How long has Invitech been in Hungary?

DB: Invitech is a Hungarian native company, with roots stretching back to the privatization of the telecommunications industry in the early 1990s.

BBJ: What is your staff headcount?

DB: The Invitech team numbers around 600.

2

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Budapest Business Journal | February 15 – February 28, 2019

Business | 11

The Case for Gold as an Investment: Part I In the first installment of a three-part series, Les Nemethy and Sergey Glekov of Euro-Phoenix look at just how good an investment gold really is.

The world is a much riskier place than most people realize. A very incomplete list of just some of the possible risks in the global geopolitical system include: • China challenging U.S. hegemony • Russia trying to regain some of the old Soviet glory by challenging the status quo, from Ukraine to Syria • The rise of populism, nationalism, illiberalism, the erosion of tolerance and “win-win” thinking, from Turkey to the Philippines and from the United States to Hungary • Global debt levels spiraling out of control (see previous article), with bubbles emerging in China, Japan, Italy, etc.

• New and previously unimagined forms of hostility, from potentially destabilizing technologies like artificial intelligence or hybrid warfare • Brexit

The lives of most well-to-do people (e.g. investors) in the world is enshrouded in normalcy. There is probably a natural human tendency or bias: unless we feel things on our own skin, we tend to ignore them. One could argue that risk in the world is underpriced.

Exhibit 1: Gold in Crisis Periods

2007

Enter Gold

For centuries, gold has been considered the great hedge. This article will focus on the value of gold as a hedge.

My next column will analyze global supply and demand for gold. And the third and last article in the series will look at different methods of holding gold (physical gold, ETF’s, gold miners, royalties, etc.) and summarize the case for holding gold.

Exhibit 1 (the chart to the right) demonstrates quite graphically that when equity and debt markets are in crisis, gold performs quite well, or at least better: Gold has low or negative correlation with other major asset classes, such as the S&P500, U.S. corporates, Treasuries, and Commodities.

Exhibit 2 (the chart below) sets out in easily visible fashion how returns on gold and the Dow Jones Industrial Average differ dramatically, decade by decade, over the approximately last five decades.

For those readers who might not remember, the 1970s was a tough decade, characterized by the oil crisis of 1973, the recession of 1973-1975, high unemployment, and a terrible period of stagflation. In the 1980s the back of

Exhibit 2: Correlation of Dow Jones Industrial Average and Gold, by Decade, 1971-2018

1990 1987

2010

1997

1990 Start

End

S&P 500 index

U.S. Treasuries

Gold

1987 crash

8/25/87

10/19/87

-33.2%

-7.2%

5%

Iraq invades Kuwait

7/17/90

10/12/90

-17.6%

-0.4%

7.6%

Asia crisis

10/7/97

10/28/97

-6.2%

0.0%

-4.6%

Russia/Long-Term Capital Management crisis

7/20/98

10/8/98

-18.7%

5.3%

1.2%

Sept. 11

9/10/01

10/11/02

-22.3%

11.2%

16.6%

Global financial crisis

10/11/07

3/6/09

-54.5%

15.8%

25.6%

2010 euro zone crisis and flash crash

4/20/10

7/1/10

-14.5%

4.5%

5.1%

U.S. sovereign debt downgrade

7/25/11

8/9/11

-12.3%

3.6%

7.8%

Taper tantrum

5/22/13

6/24/13

-4.8%

-2%

-6.4%

China worries

8/18/15

2/11/16

-11.8%

3.5%

11.5%

-19.6%

3.4%

6.9%

Average

Years

Correlation

1971-1980

Return Gold

DJIA

-0.102

1,479%

16%

1981-1999

-0.590

-52%

1,092%

2000-2011

0.325

458%

11%

2012-2018

-0.538

-20%

98%

2001

stagflation was broken, and the 1990s saw perhaps the most sustained period of growth of the American economy in the modern era.

If you look at the relative returns of gold vs. the Dow Jones Industrial Average since 1971, you can make arguments for either being the better investment, depending on the holding period you choose. Over the last six years gold has clearly been the loser, but over most time horizons since 1971, gold would be the winner.

If you look at the ratio of the DJIA to the price of gold, since the 1920s, you will find a huge variation: from nearly 1 to 1 in January of 1980 (when the price of gold was USD 843 and the DJIA was also at 873), to a high in August of 1999, when the DJIA was 11,326 and gold was only 253 (e.g. a ratio of approximately 45:1).

We are currently somewhere near the midrange, of 20:1.

I trust this article makes the case that gold deserves a place in most investment

portfolios based on its ability to hedge the portfolio. In other words, with a certain amount of gold in your portfolio, you can enjoy a higher level of return for a given amount of risk.

According to a World Gold Council document called “The Relevance of Gold as a Strategic Asset”, adding up to 10% gold to the average pension fund portfolio would have both increased returns and reduced volatility, resulting in higher risk-adjusted returns. The result would probably be similar for your portfolio too.

Les Nemethy is CEO of Euro-Phoenix (www.europhoenix.com), a Central European corporate finance firm, author of Business Exit Planning (www. businessexitplanningbook.com) and a former president of the American Chamber of Commerce in Hungary.

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Budapest Business Journal | February 15 – February 28, 2019

In an exclusive interview, Kannan Prabhakar, chief of projects at Apollo Tyres Ltd. and winner of the HIPA Partnership Award at the BBJ Expat CEO of the Year gala, tells the Budapest Business Journal how the Indian company has brought its “One Family” values to Hungary and seen them embraced by locals.

ROBIN MARSHALL

BBJ: The HIPA Partnership award is presented to the multinational company that does most to involve Hungarian suppliers in its value chain. What does this involve in Apollo Tyres’ case?

Kannan Prabhakar: As a company with a strong value system, we believe that our suppliers are our partners in our growth journey. Further, we engage with the local suppliers to build the foundation of a strong company. In Hungary also, we have a lot of Hungarian suppliers on

Photos by Marianna Sárközy

Sharing Common Values and a Growth Journey

Indian peers Kannan Prabhakar of Apollo Tyres (right) and Prabal Datta of Tata Consulting Services. board working with us in multiple areas, including tooling, material handling, material suppliers, logistics, maintenance, employee transportation, catering and many other areas. Right from the project stage, multiple Hungarian suppliers, design consultants and contractors were an integral part and played key roles in setting up the factory. Our “One Family” value means that we extend the concept of family not only to our employees but to our suppliers, customers and all stakeholders.

BBJ: You are the first Indian to win an award at the Expat CEO gala. What message do you think this sends?

KP: I think it was the vision of our chairman Onkar Kanwar and vice chairman Neeraj Kanwar to set up the plant in business-friendly Hungary, and hence it is a big honor for me and the company. I hope the recognition to Apollo Tyres will send a positive message to companies in India who are planning to

Róbert Ésik, the president of HIPA, with Kannan Prabhakar.

make a foray into the European market.

Currently, Indian companies continue to play an important role in Hungary’s 5% GDP growth in the third quarter, which is more than double the European average.

BBJ: In announcing you as the winner, HIPA president Róbert Ésik said two other Indian companies had invested in Hungary based on your experiences. Who are they, and how did this come about?

KP: I think the two companies are Flex Films and SRF. I think that the Hungarian government continues to work with Invest India, the investment promotion and facilitation agency in India and would have shared our experience in Hungary. With SRF we have a long association, and we shared with them our positive experiences in Hungary, the government support and the general environment in the country.

BBJ: Hungarian is a famously difficult language, and not part of the IndoEuropean family. How is your Hungarian? Do you have time to take lessons?

KP: Yes, initially I did take lessons to learn the language. But, I had to leave it midway given the massive scale of the Apollo Tyres plant and the tight deadlines to complete it. Now that the plant has started producing and achieving stability, maybe it is time to start learning the Hungarian language again.

BBJ: And are there similarities in the way Indians and Hungarians go about their work?

KP: I was reading recently that the Huns and Chauhans in India might have a common bloodline. Even though Hungary for Indians and India for Hungarians as tourist destinations are a recent phenomenon, after living in Hungary for some time, I see a lot of similarities. Like the Indians, Hungarians are proud of their culture and their past. Both are hardworking and love taking on challenges.

BBJ: In your winner’s speech, you talked of the business here going better than you could have expected. What were your initial expectations, and what are the plans for the future?

KP: Our first experience in Hungary was in 2008, but we could not go ahead with our proposed project then due to the economic downturn in Europe and other factors. So, certainly we were nervous and anxious when we decided to build our first greenfield plant outside India in Hungary.

However, we were overwhelmed with the support we received from the government.

The professional business environment helped us to set up the plant and start production smoothly. Importantly, the people have welcomed us with open arms and we think we are going to be part of the growth journey of the area and the country.

BBJ: How do you consider the Hungarian regulatory environment regarding predictability and investor friendliness?

KP: We are grateful for the support extended by the Hungarian government for the project and officials have co-operated with us in a professional manner.

BBJ: Everyone in Hungary talks about the challenges presented by the labor crisis. How is Apollo Tyres coping?

KP: Tire manufacturing is not as prevalent in Hungary as other industries, so the market has not produced the appropriate mass of qualified workers yet. Therefore, it has not been an easy job to find qualified employees. Due to this fact, we started the process even before finishing the factory itself to engage with potential employees and get them involved with the plant.

For this we tied up with universities and offered internships in the factory. Further, we have taken many employees to be trained in India and the Netherlands.

Apollo Tyres has practices which can be benchmarked with the best companies in the world and we bought these to Hungary and, as a result, have been able to hire and retain people.

The HIPA Partnership Award goes to the CEO of the local branch of a multinational company deemed to have done most to involve Hungarian companies in its value chain. Apollo Tyres opened its EUR 475 million greenfield factory at Gyöngyöshalász, 79 km northeast of Budapest, in April 2017 (the Chain Bridge in Budapest was lit in “Apollo purple” at night to mark the occasion).

Truck tires were added to the production palette in September 2018. According to the company website, Gyöngyöshalász will “reach the planned capacity for Phase I by 2019”.

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Special Report Taxation and Accounting

Tax Evasion no Longer a National Sport, but More Must be Done Efforts to make taxation in Hungary more transparent and, as a result, reduce tax fraud has brought some good results in the past few years. In particular, shrinking the so-called VAT Gap has led to improved tax collection.

90% of

the criticism and negative decisions regard VAT. That does not necessarily mean it is all down to tax evasion, which is relatively difficult to calculate in any case; it is, however, easy to make mistakes while preparing the VAT returns.

was

HUF 3.929 trillion.

If the VAT Gap was 10%, an estimated figure based on the previous figures, it means that the central budget would be missing HUF 436.5 billion in tax earnings.

It is not realistic to think that this can be reduced to zero, the expert notes, there will always be a shortfall. Even in the best performing countries, the VAT Gap is 9% in Germany and 7% in Austria, while the EU average is 12.3%.

The introduction of online invoicing has indeed been a useful method, but there are more efficient ones out there, Farkas notes.

For example, a special form, called the standard audit file for tax, is used in the Netherlands, Spain and Poland.

Detailed Data

Unlike online invoicing it is not necessarily real-time, but taxpayers still need to provide very detailed data on, for example, accounting or logistics, or any other data available in the company’s system, at certain intervals, Farkas explains.

“As a rule of thumb, where it [payment in cash] is high, the ratio of fraud is also higher.”

ZSÓFIA VÉGH

How to collect taxes more effectively must be on top of most tax authorities’ priorities.

The answer lies in the country’s tax system, which offers different kinds of loopholes. One main feature of the Hungarian tax policy is that taxes on consumption are quite high.

“By introducing the EU’s highest VATrate, which is relatively easy to dodge, we have let the door open for tax evaders,” Gábor Farkas, a director of tax and legal services at PwC Hungary, tells the Budapest Business Journal.

So, the policy’s fate rested on the government’s ability to actually collect the VAT, because had they not, the whole system would have needed to be reorganized, he adds.

Why VAT? According to the expert, any tax can be dodged. With VAT fraud and evasion, there are three possible ways to do it. Fictitious invoicing, fictitious transportation of goods and so-called carousel fraud. Employing these methods, tax evaders can earn quite a lot in a fairly short amount of time, since evasion is particularly easy with VAT. Looking at the statistics of the National Tax and Customs Administration of Hungary (NAV),

Last year, the tax revenue of the budget

Mind the Gap

Thanks to measures aimed at whitening the economy, tax fraud has been curbed. NAV and the Ministry of Finance have gradually introduced a number of instruments, most notably the domestic recapitulative statement (as part of the VAT return), the Electronic Trade and Transport Control System (EKÁER), and online cash registers linked directly to the tax authority.

As a result, the rate of undeclared and unpaid VAT has declined significantly in Hungary. While

in

2012,

22% of the total VAT tax liability was lost, by 2016 the so-called “VAT Gap” was down to 13%.

“If we move to that direction, Hungary could take action more effectively against tax evaders,” he adds. This may take place sometime in the future as it arises among policy makers every now and then, Farkas says.

Of the difficulties involved, the expert highlights those related to IT infrastructure.

This system requires robust IT backup and the tax authority needs to pay attention to project management as well.

Tax evasion used to be referred to as a Gábor Farkas of PwC Hungary. national sport in Hungary, but it no longer is. The main types of tax evasion, such as “black” employment or unreported income With the adoption of these measures, are not necessarily as frequent as they used the first two of the abovementioned three to be in part due to the lower tax rate and fraud types (fictitious invoicing and wage bill taxes, and the implementation of fictitious transportation of goods abroad) several instruments by the tax authority and have been largely eliminated, but carousel the Ministry of Finance. fraud continues.

However, the ratio of cash payments in To fight this, and to further improve the economy is still high, and in the past transparency, the online invoice reporting few years it has increased significantly, system was introduced last year. (For more almost doubling from 2016 to 2018. on this, see “Brave New World of Online “As a rule of thumb, where it is high, the Invoicing has Been a Success, Experts Say” ratio of fraud is also higher,” Farkas points out. on page 16.)

This is something that needs some The VAT Gap refers to the difference improvement, as the ratio is fairly high at between expected and actual VAT revenues an EU-level comparison and many retail and represents more than just fraud and outlets still don’t accept card payments. evasion and their associated policy measures. Online cash registers are mandatory, and The gap also covers the VAT lost due to, result in some sort of control, but those for example, insolvencies, administrative businesses still not accepting cards should errors and legal tax optimization. be further motivated, Farkas says.

3

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Budapest Business Journal | February 15 – February 28, 2019

Hungary’s Tax System Stable but Administration-heavy Although the administrative side of the Hungarian taxation system might be daunting, the local tax environment is stable, Róbert Heinczinger, tax services partner at EY Hungary, tells the Budapest Business Journal.

CHRISTIAN KESZTHELYI

The local market has seen value-added tax reductions in certain sectors for some goods, as the levy is an important income source for a state budget, no radical changes are expected in the near future, the tax expert says.

Despite the often eye-catching changes (most recently, Prime Minister Viktor Orbán announced women who have four or more children will be exempted from income tax for life, as the country battles to overcome the demographic mathematics of its shrinking population), the volume and the magnitude of such changes have significantly dropped in number over the past few years.

Additionally, the Hungarian markets have seen tax measures that certainly contribute to the economy, in general.

“I can single out anti-black economy measures that work very efficiently. These include on-line cash registers at retailers in B2C, the EKEAR system and now the online invoice data reporting in B2B,” Heinczinger says.

“These measures have helped Hungary become a regional champion in how efficiently the country collect taxes; it is estimated that these measures resulted in annual extra tax revenues of more than HUF 200 billion,” the EY partner adds.

Harmful Practices

He also mentions the OECD BEPS rules (Base Erosion and Profit Shifting) ADVERTISEMENT

in fighting harmful tax practices, the framework of which is followed by

127

countries,

with the number of states signing up still growing.

“This is a big change in our profession; in fact, I have not seen a bigger one, including EU accession back in 2004,” Heinczinger says.

While there is no single measure that exists for grasping the tax competitiveness of a country, tax revenues as a percentage of GDP is a figure that is often considered helpful for getting a rough overall picture of how a country does in terms of taxes.

“Hungary like many other countries in the region, tends to come out better than

“In today’s environment where human resources are scarce, it is imperative that the time necessary for tax compliance be significantly reduced.”

Róbert Heinczinger of EY Hungary.

Republic, Poland and Slovakia]. The declared aim of the government is to reduce tax centralization to the regional average by 2021, which means further tax cuts are coming,” says Heinczinger.

He adds that, based on his experience “Clients love the 9% corporate income tax rate and wide tax treaty network, that there are no withholding taxes, there is flexibility of opting for an alternative fiscal year, functional currency, or IFRS.” Like other countries in the region competing for FDI, Hungary traditionally maintains higher consumption taxes and lower income taxes compared to Western Europe.

Important Source

“The VAT with its 27% general rate is an Western European countries, that means less important source of revenue for the state is collected in a centralized manner. Hungary budget. Therefore, levying a lower rate of VAT on certain goods and services is at about 39-40%; that is about the EU average, better than most Western countries, is limited, as it reduces government tax but worse than the other V4 countries [Czech revenues,” Heinczinger explains.

Special Report | 15 “In addition, the reduction is only possible for certain limited categories of goods and services allowed by the general EU rules. By reducing the VAT rate, the government can drive economic policies.

It may be that in markets where prices do not change much as a result of the VAT reduction, a business can keep more as revenues from the money they collect from their customers,” he adds.

The hospitality sector’s tax reduction is a good example, he says. It has enabled hotel and restaurant operators to keep more money as revenues against the increased costs, particularly in wages.

“In some other markets final gross – VAT inclusive – consumer prices may reduce as a result of lower VAT rate and thus can influence consumer preference at one end of the chain, while at the other end they can result in higher revenues for businesses. An example may be pork, where farmers could keep more money, and at the same time, there may have been a higher demand for pork versus other comparable products,” says Heinczinger.

In spite of the stable and welcoming environment, there is room for improvement.

“One area is certainly easing the administrative burden. In today’s environment where human resources are scarce, it is imperative that the time necessary for tax compliance be significantly reduced,” Heinczinger says.

In his experience, Hungarian businesses spend more than

250 hours

on tax compliance, which is very high on any comparison, the tax expert says.

Heinczinger believes that reducing the number of taxes from more than 60 could help ease the administrative burden. He says that 40 types of taxes account for 99% of total tax revenues, the remaining 20-plus only generate 1%.

“Cutting the number of taxes may not be enough; one also needs to look at the so-called large taxes. For example, the Hungarian VAT return is extremely complex and detailed. If other countries manage from far less information, then that may also be a learning point,” he concludes.

Editor’s note: The other Big Four consultancies were approached to contribute to this article, but has either not responded by the time we went to press, or declined to comment.

Special Report

16 | 3

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Budapest Business Journal | February 15 – February 28, 2019

Brave New World of Online Invoicing has Been a Success, Experts Say Launched last summer, Hungary’s online invoice reporting system has now been running for more than half a year – enough time for the National Tax and Customs Administration (NAV) to start to do some checks and for tax experts to analyze first impressions, experts tell the Budapest Business Journal.

ZSÓFIA VÉGH

The start was more or less smooth: most firms were prepared for the change and could join the system from its launch on June 1, 2018. Others that, for example, could not allocate enough resources to it, found it much harder to make the switch.

But by the end

of

2018,

everyone had caught up.

By law, it is the responsibility of the companies to adjust their systems to the changes. NAV gave a level of support never

entire invoicing process to a third party, such as a consultancy.

According to information from NAV, more than 28 million invoices have been uploaded to the online accounting system

by January 2019. With this quantity, the tax authority could have a good insight into the billing practices related to economic events of high amounts, writes Péter Kóczé, a tax expert at RSM Hungary, on that company’s blog.

Now the non-sanctioned amnesty period has come to end, those still not compliant can expect an unprecedently high fine, Nagy says: The fine is

HUFper500,000 invoice.

Dániel H. Nagy of Mazars. before seen at the introduction of the online invoicing, says Gábor Farkas, a director of tax and legal services at PwC Hungary.

There was no lag in their response to questions and support from NAV’s IT staff was also first rate, he adds. “Even after the system went live, the supportive behavior of the tax authority remains, I have no knowledge of anyone having been fined for problems related to online invoicing,” Farkas notes.

The system is not unique. There are many countries with similar solutions, but the way in which the Hungarian system is structured and how the different elements are built on each other is rather unique, Dániel H. Nagy, director of tax and legal services at Mazars SK told the BBJ. There was a need for such a thorough approach as the ratio of unreported income and unpaid VAT in Hungary has traditionally been fairly high. Although the time frame given for the introduction of online invoicing system was fairly long, still, many companies did not start in a timely. This had a knock on effect later, with IT professionals overburdened by a sudden rush of assignments.

To introduce the system, companies had to apply new online solutions. They had a number of options from budget friendly offthe-shelf programs to more costly bespoke solutions. Several large or multinational

companies chose to develop their own systems to meet the requirements of online invoicing, says Nagy. That could cost firms millions of forints.

Many others purchased an interface program that converts the companies’ data – a separate module that can be adjusted to

“Even after the system went live, the supportive behavior of the tax authority remains, I have no knowledge of anyone having been fined for problems related to online invoicing.” any system. An even more cost-effective solution for smaller firms was to replace their existing invoicing system for a newer one that meets the tax authority’s requirements, Nagy adds.

Outsourcing an Option

The tax authority also developed its own program and made it available free of charge. And there was an option allowed by the new legislation for outsourcing the

The law applies only to domestic taxpayers who pay VAT. Although the first version was launched only recently, a new version of the online invoicing system already came out at the end of January. As of spring, the files of the old system will no longer be available. This means companies have a limited amount of time to follow up the changes, which considering the reaction time of these companies, is a serious challenge, Farkas notes. It also means that IT developers will have to modify the data reporting modules of the programs so they can continue to send the correct data to NAV. It is yet to be seen how much progress taxpayers have made in the field of “digital development” as a result of the online invoice regulation, and how smoothly they can incorporate these changes in their systems, Kóczé writes.

Despite efforts to make the system more transparent, some firms do find loopholes.

One such practice is buying a cheap invoicing system compatible with the new rules and issuing an invoice to the tax authority using that. But they can also issue an invoice using their SAP-system, which will appear in its internal register. Issuing two invoices for the same business activity is questionable in the least, Nagy notes.

The main purpose of introducing the online invoice obligation was to whiten the economy and curb VAT fraud and evasion. Overall, the introduction has been successful, according to Farkas. With the data available, the tax authority receives a more comprehensive picture of the ongoing businesses and can use the information to improve its services. For example, it can improve its risk analysis system, which automatically selects the companies for audit and avoids unnecessary checks.

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Special Report | 17

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

andrea butkovics Ernő Varga Melinda Németh

1134 Budapest, Váci út 49.

(1) 452-6900 office@colling.hu

131

208

–

✓

✓

✓

–

✓

Ÿ

✓

✓

✓

–

–

–

✓

–

5 1995

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

zsolt Ruszin – –

1097 Budapest, Könyves Kálmán körút 12–14.

(1) 238-8023 fairconto@fairconto.hu

✓

✓

✓

–

–

–

–

–

19 1990

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

orsolya viktor Mária Csonka Attila Körmöci

1119 Budapest, Fehérvári út 44.

(1) 209-6448 balance@balancekft.hu

Colling Könyvelő éS tanáCsadÓ kft. www.colling.hu 18

19

faiRConto zRt. www.fairconto.hu

20

balanCe adÓ- és ügyviteli kft.

129

155

–

✓

✓

✓

–

✓

Dunakeszi Egészségügyi Szolgáltató Kft., Dél-Budai Egészségügyi Szolgálat Kft., Rustler Kft., R-Design Kft.

21

eCoCReative zRt.

106

106

–

✓

✓

✓

–

✓

Ÿ

✓

✓

✓

✓

✓

–

–

–

1 2007

Individuals (100) –

tibor papp – –

1116 Budapest, Fegyvernek utca 8.

(1) 550-0510 iroda@ecocreative.hu

22

ÍRisz offiCe zRt.

105

118

–

✓

✓

✓

–

✓

Ÿ

✓

✓

✓

✓

✓

–

–

–

4 2000

(100) –

tibor papp – –

1114 Budapest, Bartók Béla út 29.

(1) 550-0510 iroda@iriszoffice.hu

www.balancekft.hu

–

http://iriszoffice.hu

3

www.bbj.hu

aCCounting Consulting

aCCounting tRaining

pRepaRation of ifRs RepoRts and finanCial statements

pRepaRation of montHly and annual RepoRts

payRoll aCCounting

finanCial Consulting

tax Consulting

management Consulting

m&a

tRansfeR pRiCing

HR Consulting

no. of full-time employees on januaRy 1, 2019 yeaR establisHed

oWneRsHip (%) HungaRian non-HungaRian

audit

www.precizkonyveles.hu

pRepaRation of aCCounting poliCy

peRsCRiptoR Könyvelőiroda KFt.

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

23

otHeR seRviCes

total net Revenue in 2018 (Huf mln)

Company Website

speCial aCCounting seRviCes

91

124

–

✓

✓

–

–

✓

Ÿ

✓

✓

✓

–

–

–

–

–

16 2010

Tibor Kmeczó (100) –

tibor kmeczó – –

1201 Budapest, Berkenye sétány 5.

(1) 219-0991 info@perscriptor.hu

82

82

–

✓

✓

–

✓

✓

Ÿ

✓

–

✓

–

–

✓

✓

–

11 2003

Eszter Danku-Szigecsán (100) –

tamás danku – –

1011 Budapest, Szilágyi Dezső tér 1.

(1) 700-4141 hello@airon.hu

✓

Festina Magyarszág, Gigamatrac, Szabó Péter, Doktorfit Kft., Smart-Home Zrt., Formative Zrt.

✓

–

✓

–

✓

–

–

–

7 2008

Éva Komonyi (100) –

éva komonyi – –

1139 Budapest, Váci út 95.

(1) 788-7920 komonyi.eva@ consider.hu

✓

✓

✓

✓

–

–

–

–

7 2007

Individuals (100) –

beáta kincs – –

4026 Debrecen, Bem tér 14.

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

–

✓

–

–

–

–

–

7 1990

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

Csaba benedek – –

1033 Budapest, Laktanya utca 35.

(1) 439-2300 kozpont@ adószabaszat.hu

majoR Clients in 2018

aiRon Consulting kft. www.airontrust.hu 24

ConSider Könyvelő iRoda kft. www.consider.hu

61

25

26

27

audit-labteCH kft. www.audit.labtech.hu

adÓszabászat Könyvelő, BérSzámFejtő, éS adÓtanáCsadÓ kft.

61

–

✓

✓

–

✓

28

59

–

✓

✓

–

✓

✓

58

63

–

✓

✓

✓

–

✓

Ÿ

✓

✓

✓

✓

–

✓

–

–

–

6 1994

Individuals (100) –

péterné bónácz Anikó Bónácz Vargáné István Varga

1224 Budapest, III. utca 13.

(1) 362-4748 info@caldera.hu

✓

✓

✓

✓

✓

✓

✓

Ÿ

(100) –

péter Hajnal, anna szabó kisné – –

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

✓

✓

✓

–

✓

✓

✓

25 2017

BPiON Holding Zrt. (100) –

tamás kovács, béla kakuk – –

1139 Budapest, Váci út 99.

(70) 679-0279 hello@bpion.com

Ÿ

1994

Andrea Koncz (100) –

mihály Szőcs, andrea koncz – –

6721 Szeged, Juhász Gy. utca 11.

(62) 323-625 titkarsag@ framekonyveles.hu

32

34

–

✓

✓

–

–

✓

FCB Hungary Zrt., Turbo Plus Kft., Gaut Bt., Manta Marketing Kft., Grabow&Kiss Kft.

Ÿ

3,455

–

✓

✓

✓

✓

✓

Ÿ

✓

Ÿ

Ÿ

✓

✓

✓

✓

✓

✓

BARE, Kinnarps, TEDx LibertyBridgeWomen, M7 Real Estate, Roma Education Fund

✓

bdo magyaRoRszág (könyvelés, béRszámfejtés és outsouRCing) www.bdo.hu

bpion seRviCes kft. bpion.com NR

Frame Könyvelő éS adÓtanáCsadÓ iRoda NR kft.

addRess pHone email

59

www.caldera.hu

NR

top loCal exeCutive Cfo maRketing diReCtoR

VB2MW Kft., Mustáng Store Kft., Safety-Kleen Kft., Gyulai Kft., Cívis Seed Kft., Labtech Kft.

www.adoszabaszat.hu

CaldeRa számviteli, pénzügyi és tanáCsadÓ kft.

Special Report | 19

net Revenue fRom aCCounting in 2018 (Huf mln)

Rank

Budapest Business Journal | February 15 – February 28, 2019

Ÿ

Ÿ

–

✓

✓

–

–

✓

Ÿ

✓

✓

✓

–

–

–

–

–

www.framekonyveles.hu

1989

NR

mazarS KönyvSzaKértő és tanáCsadÓi kft.

Ÿ

Ÿ

–

–

✓

–

✓

✓

Ÿ

✓

✓

✓

–

✓

–

✓

–

150 1991

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

philippe michalak budzan – Eszter Rozgonyi

1123 Budapest, Nagyenyed utca 8–14.

(1) 429-3010 mazars@mazars.hu

NR

Rödl & paRtneR magyaRoRszág

Ÿ

1,347

✓

✓

✓

✓

✓

✓

Ÿ

✓

✓

✓

✓

✓

–

✓

–

Ÿ

– Rödl International GmbH (100)

Roland felkai – –

1062 Budapest, Andrássy út 121.

(1) 814-9800 budapest@roedl.com

www.mazars.hu

www.roedl.hu

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

1991

This list was compiled from responses to questionnaires received by February 13, 2019 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

20 | 3

Special Report

www.bbj.hu

Budapest Business Journal | February 15 – February 28, 2019

Tax consultants pit and soCial seCuRity

CoRpoRate tax

tRansfeR pRiCing

tax and finanCial due dilligenCe

industRy oR speCial taxes

adveRtising tax

exCise tax

auditing

aCCounting

payRoll aCCounting

finanCial Consulting

HR Consulting

Real estate Consulting

otHeR seRviCes

vat

yeaR establisHed no. of full-time employees on JanuaRy 1, 2019

tax Consulting Related seRviCes

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

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

Robert stöllinger, gábor beer William Curley Gabriella Liptay

1134 Budapest, Váci út 31.

(1) 887-7100 info@kpmg.hu

2001 118

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

(100) –

zsolt kalocsai Klára Vaitz Szilvia Morvay

1138 Budapest, Faludi utca 3.

(1) 886-3700 info@rsm.hu

810

2009 25

✓

✓

✓

✓

✓

✓

✓

✓

–

–

–

–

–

–

Individuals (100) –

károly Radnai – –

1124 Budapest, Csörsz utca 43.

(1) 920-6800 info@orientax.hu

2,871

2002 49

✓

✓

✓

✓

✓

–

–

–

–

✓

✓

✓

–

–

Individuals (100) –

ferenc kölber – –

1124 Budapest, Jagelló út1 4.

(1) 225-3490 info@crowe.hu

625

649

2006 26

✓

✓

✓

✓

✓

✓

✓

✓

–

–

✓

✓

✓

✓

– Leitner+Leitner International GmbH (100)

márta siklós, Judit Jancsa-pék, nóra Rácz – –

1027 Budapest, Kapás utca 6–12.

(1) 279-2930 budapest.office@ leitnerleitner.com

516

839

1959 51

✓

✓

✓

✓

✓

✓

✓

✓

–

✓

✓

–

–

–

Individuals (100) –

ákos balogh Enikő Kovács Ágnes Kramer

1135 Budapest, Mór utca 2–4.

(1) 237-9810 kovacs.eniko@saldo.hu

458

466

1998 22

✓

✓

✓

✓

✓

✓

✓

✓

–

–

–

–

–

–

Individuals (100) –

zoltán lambert, tamás gyányi Andrea Potássy Tamás Dely

1143 Budapest, Stefánia út 101–103.

(1) 887-3700 info@wtsklient.hu

252

252

2012 5

✓

✓

✓

✓

✓

✓

✓

✓

–

–

–

–

–

–

Tamás Verbai (67), Péter Juhász (13), Péter Molnár (10), Miklós Makai (10) –

tamás verbai Péter Juhász –

1138 Budapest, Népfürdő utca 22.

(1) 700-1470 info@hidadoszakerto.hu

151

382

2001 23

✓

✓

✓

✓

✓

✓

✓

✓

–

✓

✓

✓

✓

✓

Individuals (100) –

gyöngyi ferencz, andrea kuntner, erik thurn – –

1134 Budapest, Váci út 33.

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

132

998

2002 114

✓

✓

✓

✓

✓

✓

✓

✓

–

✓

✓

✓

✓

–

Finacont Holding Befektetési Kft. (100) –

györgy pintér, ádám menich Gábor Kis –

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

(1) 345-0092 finacont@finacont.com

125

231

Ÿ

Ÿ

Ÿ

Ÿ

Ÿ

Ÿ

Ÿ

Ÿ

✓

–

–

–

–

–

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

péter bergmann József Kiss, Sándor Soltész Mónika Tóth-Balog

1138 Budapest, Váci út 186.

(20) 745-7100 bergmann@bergmann.hu

total net Revenue in 2018 (Huf mln)

Company Website

net Revenue fRom tax Consulting in 2018 (Huf mln)

Rank

Ranked by net revenue from tax consulting in 2018 (HUF mln)

3,228

23,220

1,053

2,094

810

738

oWneRsHip (%) HungaRian non-HungaRian

top loCal exeCutive Cfo maRketing diReCtoR

addRess pHone email

kpmg magyaRoRszág www.kpmg.hu 1

2

Rsm HungaRy zRt. www.rsm.hu

1989

Ÿ

oRientax adótanáCsadó zRt. 3

www.orientax.hu

CRoWe fst Consulting kft.

4

www.crowe.hu

leitneR + leitneR tax kft. www.leitnerleitner.com 5

6

saldo pénzügyi tanáCsadó és infoRmatikai zRt. www.saldo.hu

Wts klient adótanáCsadó kft.

7

8

www.wtsklient.hu

Híd AdószAkértő és pénzügyi tanáCsadó zRt. www.hidadoszakerto.hu

vgd HungaRy kft. www.vgd.eu 9

finaCont szolgáltató és tanáCsadó kft.

10

www.finacont.com

beRgmann könyvszAkértő és adótanáCsadó kft.

11

www.bergmann.hu

1995

Ÿ

3

www.bbj.hu

✓

–

✓

–

✓

–

–

–

–

–

–

–

–

–

–

–

–

–

Individuals (100) –

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

1146 Budapest, Zichy Géza utca 5.

(1) 422-1339 info@mgi-bpo.hu

Real estate Consulting

✓

HR Consulting

–

finanCial Consulting

✓

payRoll aCCounting

✓

aCCounting

✓

auditing

✓

exCise tax

✓

adveRtising tax

✓

industRy oR speCial taxes

✓

tax and finanCial due dilligenCe

✓

István Nemecz (30) ACCACE BPO Holding (70)

www.pmxconsulting.hu

tRansfeR pRiCing

1994 6

CoRpoRate tax

99

pit and soCial seCuRity

99

vat

yeaR establisHed no. of full-time employees on JanuaRy 1, 2019

pmx Consulting gRoup magyaRoRszág adótanáCsadó kft.

otHeR seRviCes

total net Revenue in 2018 (Huf mln)

12

Company Website

tax Consulting Related seRviCes

Special Report | 21

net Revenue fRom tax Consulting in 2018 (Huf mln)

Rank

Budapest Business Journal | February 15 – February 28, 2019

✓

✓

✓

✓

✓

✓

✓

–

–

–

–

–

–

–

oWneRsHip (%) HungaRian non-HungaRian

top loCal exeCutive Cfo maRketing diReCtoR

addRess pHone email

János Szalai (97.78) Péter Natkay (2.22)

János szalai – –

1066 Budapest, Mozsár utca 16.

(1) 272-7885 info@pmxconsulting.hu

istván nemecz Katalin Berényi Nemeczné Norbert Nagy gábor dénes, ferencné Wessely Gábor Dénes –

1132 Budapest, Váci út 30.

(1) 412-3530 istvan.nemecz@ accace.com

13

aCCaCe HungaRy kft.

94

601

1996 52

14

foRbis adótanáCsadó kft.

91

91

2005 9

15

bpo audit tax

87

521

2001 45

✓

✓

✓

✓

✓

✓

–

–

✓

✓

✓

✓

–

–

(100) –

www.m-audit.hu

65

80

1990 6

✓

✓

✓

✓

✓

✓

–

–

✓

✓

–

✓

✓

–

Libra Szoftver Fejlesztő Zrt. (98.6), Andrea Radocza Weszelovszkyné (1.4) –

györgy kozma Józsefné Kulifai István Rajkai

1142 Budapest, Erzsébet királyné útja 125.

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

faiRConto zRt.

45

210

1995 6

✓

✓

✓

✓

✓

✓

✓

–

✓

✓

✓

✓

–

✓

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

zsolt Ruszin – –

1097 Budapest, Könyves Kálmán körút 12–14.

(1) 238-8023 fairconto@fairconto.hu

31

171

1992 18

✓

✓

✓

✓

✓

✓

✓

–

–

✓

✓

–

✓

–

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

andrea butkovics Ernő Varga Melinda Németh

1134 Budapest, Váci út 49.

(1) 452-6900 office@colling.hu

Ÿ

Ÿ

1993

Ÿ

Ÿ

Ÿ

Ÿ

Ÿ

Ÿ

Ÿ

–

Ÿ

✓

✓

✓

–

–

–

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

József láng – –

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

Ÿ

3,455

1989

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

(100) –

zoltán gerendy, ilona orbók – –

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

Ÿ

Ÿ

✓

✓

✓

–

–

–

–

–

–

✓

–

–

–

–

Ÿ Ÿ

Csaba magyar – –

2161 Csomád, Verebeshegy utca 11.

(1) 383-0333 info@crwwgroup.net

andrás fülöp Gerard Lucey Csanád Bánhegyi

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

16

17

www.accace.com

www.forbis.hu

www.mgi-bpo.hu

m-audit könyvvizsgáló, Fejlesztő és szolgáltató kft.

www.fairconto.hu

1119 Budapest, Pajkos utca 24.

(1) 382-0106 tax@forbis.hu

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

NR

abt HungáRia tanáCsadó kft. www.abt.hu

bdo magyaRoRszág (adótanáCsadás) NR

NR

www.bdo.hu

CRystal WoRldWide zRt. www.crwwgroup.net

deloitte magyaRoRszág NR www.deloitte.hu

NR

ey magyaRoRszág www.ey.hu

gRant tHoRnton NR HungaRy www.grantthornton.hu

NR

MAzArs könyvszAkértő és tanáCsadói kft. www.mazars.hu

Ÿ

Ÿ

16,767

Ÿ

2018 15

(1)

Ÿ

Ÿ

1,490

Ÿ

Ÿ

Ÿ

18,168(3)

Ÿ

1,347

1990(2) 607

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

– (100)

1989 577

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

– Ernst & Young Center Cluster Limited (100)

botond Rencz Csaba Horváth Ágnes Pellion

1132 Budapest, Váci út 20.

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

Waltraud körbler, jános kővágó, ágoston Jakab – –

1134 Budapest, Dévia utca 26–28.

(1) 455-2000 office@hu.gt.com

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

–

–

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

1991 150

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

–

–

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

philippe michalak budzan – Eszter Rozgonyi

1123 Budapest, Nagyenyed utca 8–14.

(1) 429-3010 mazars@mazars.hu

1989 850

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

– PwC CEE (100)

tamás lőcsei Tamás Pál Borbála Palotai

1055 Budapest, Bajcsy-Zsilinszky út 78.

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

✓

✓

✓

✓

✓

–

✓

–

✓

✓

✓

✓

–

✓

– Rödl International GmbH (100)

Roland felkai – –

1062 Budapest, Andrássy út 121.

(1) 814-9800 budapest@roedl.com

1991

Ÿ

pWC magyaRoRszág www.pwc.hu NR

Rödl & paRtneR magyaRoRszág NR

www.roedl.hu

1991

Ÿ

NOTES: (1) Data of business year 2017 of Deloitte’s subsidiaries, Deloitte Zrt. provides tax services. (2) Establishment year of Deloitte Üzletviteli és Vezetési Tanácsadó Zrt. (3) Data of business year July 1, 2017-June 30, 2018.

4

www.bbj.hu

Budapest Business Journal | February 15 – February 28, 2019

Socialite Photos by Gabriella Kiss

Ráth Villa, Budapest’s Shrine to Hungarian Art Nouveau David Holzer embarks on a pilgrimage to discover the differences between Szecesszió and Art Nouveau.

for

73

Kajahu restaurants to open in Austria, Czech Republic, Poland and Slovakia by 2030.

Thinking back to my question as to whether art movements began in Hungary and emanated outwards, I found the idea that Kajahu is a pioneer somehow heartening. It’s about time Hungary had its own international chain of restaurants.

DAVID HOLZER

On a wonderfully gloomy late January afternoon, I made my way through a Budapest neighborhood of large villas.

Some looked abandoned, others were marked by the flag of a foreign power. All had seen better days.

I walked into up Városligeti fasor in a stiff wind that promised rain. My destination was the György Ráth Villa, once a family home but now a museum to Art Nouveau, in particular Hungarian Szecesszió, or Secessionist art. I found it opposite the Reformed Church, itself an intriguing building.

Although I’d been told that the Szecesszió was Hungary’s take on art nouveau, I hadn’t been able to establish what the difference was between the two in my own mind. I hoped that all would be made clear at the villa. I was not disappointed.

Viewed from the path, beside a patch of grimy snow that refused to melt, the Ráth Villa looked small. This was a good sign. I had not yet had lunch and my stomach was beginning to protest discreetly.

It looked like I could be in and out of the Ráth Villa in an hour at the most.

Szecesszió architecture. It’s also the home of the ultra-modern Kajahu restaurant.

Kajahu’s gimmick, which it doesn’t need, is that you order using a computer set into your table, like one of those old-fashioned Asteroids video games. Unless there’s a virus in the machine, there’s no chance of your order being wrong.

This is an ingenious idea and I’d assumed, because of this, that Kajahu was part of a big chain. It isn’t. Yet. It’s the brainchild of Hungarians, and its parent company, CyBERG, is traded on the Budapest Stock Exchange. According to a recent article on bbj.hu, Kajahu has cleared a franchise to open in the Parndorf Fashion Outlet in Austria, near the border with Hungary. CyBERG also signed a franchise agreement last year

I was confident I’d leave enlightened but not exhausted. This turned out to be the case.

Secessionism is a broadly Europe-wide art movement that began in France and spread across the continent in the late 19th and early 20th century. Somewhat paradoxically, it rejected tradition in favor of the modern, but also harked back to bygone ages.

I would guess that the spark for Hungarian Szecesszió was the Viennese Secession, although I do feel somewhat disloyal in writing this. I would love to know if the influence ever went the other way, from Hungary to Austria and beyond.

Rebel Figure

A leading light of the Vienna Secession, which manifested its rebellion against the stuffiness of the mainstream art world in the form of Art Nouveau, was the great Gustav Klimt. Think of the infinitely reproduced The Kiss (1907/08).

Art Nouveau can be crudely defined as a highly decorative style inspired by natural shapes. This gave it a freeflowing sensuality that was combined with a romantic sensibility derived, I think, from the British pre-Raphaelites.

Hungarian Szecesszió added the influence of oriental design and the not insignificant contributions of this country’s folk art.

The difference between what was produced in Hungary and the rest of Europe became clear as I sauntered around the Ráth Villa. Work by British textile designer William Morris and his followers in the Arts and Crafts movement was displayed adjacent to

American Tiffany Lamps, which first appeared at the end of the

19th century.

Towards the end of my visit, I was sitting on a clear Perspex chair usually occupied by the security guard, who had a face like a friendly film noir conman. I was trying to imagine what the villa would have been like when the Ráth family was in residence, when I became aware of an oddly familiar piece of music echoing through the house.

An electric piano that sounded like rain falling tinkled over an insistent bassline and skittering drums.

Right then I couldn’t pin down what the music was, but it was a perfect fit with the mood inside the Ráth Villa that afternoon, which was oddly, sweetly sad.

What, I wondered, happened to the Ráth family when World War One came and was followed by the tumult of the years before WWII. Where did they end up? Who of the family is left today?

Just before I left, I came across a room not much bigger than a cupboard. This was where the music was coming from. It was part of the soundtrack to an educational movie in Hungarian. The music was a loop of the intro to “Riders on the Storm” by The Doors. Here, in the Ráth Villa, it made more sense than it ever had the countless times I’d heard it before.

Munching on the Modern

Stepping out of the Ráth Villa, I was instantly hungry. I headed for Petőfi Sándor utca, just down from Deák Ferenc tér. This street boasts, to my eye at least, a fine example of what is either Art Nouveau or

Art Nouveau can be crudely defined as a highly decorative style inspired by natural shapes. This gave it a free-flowing sensuality that was combined with a romantic sensibility derived, I think, from the British pre-Raphaelites. Hungarian Szecesszió added the influence of oriental design and the not insignificant contributions of this country’s folk art.

The food is simple and healthy, with a decent enough choice for vegetarians.

There’s also a small deli at the back of the restaurant. It was afternoon when I was there but in the evenings there’s often a DJ. Fortunately, the music tends towards the mellow and is, in any case, not at all obtrusive.

If you fancy, you can also cook your own food at Kajahu and invite your friends along. No doubt this is not an idea that’s unique to Kajahu, but I’ve not seen it done anywhere else in Budapest.

Sitting in the clean, well-lit space of Kajahu, fiddling with my mouse mat with one hand while I munched on a pretty good vegetarian burrito with the other, I allowed the admittedly pleasant sense of fin de siècle gloom that had settled on me since the Ráth Villa to drift away on a cloud of shiny modern optimism.

The György Ráth Villa is at Városligeti fasor 12, with the nearest metro stop Kodály Körönd.

Kajahu is at Petőfi Sándor u. 11.

4

www.bbj.hu

Budapest Business Journal | February 15 – February 28, 2019

Socialite | 23

Wine Tasting Season Reaching Full Swing With spring in the air and palates primed for new sensations after the winter slumber, the tasting season is well and truly underway in Budapest.

ROBERT SMYTH

The grand tasting of Furmint February once again rocked the Hungarian Agricultural Museum to the rafters on February 7, with almost 90 wineries pouring more than 200 wines. It was followed the next day by another large tasting in Miskolc, a short hop from Tokaj.

It was preceded by a press and trade Furmint tasting in London at 67 Pall Mall on January 30.

The London event was fully-subscribed and went very well, judging by posts from my London-based wine writer colleagues.

Zsuzsa Toronyi, one of the event’s organizers, confirmed there will definitely be a follow-up tasting in the British capital next year.

Attendees to this year’s inaugural London tasting included Steven Spurrier, the organizer of the famous “Judgement of Paris” wine tasting

of

1976,

which shook the wine world when Californian Cabs beat Bordeaux heavyweights in a blind tasting.

Spurrier, who has appeared in Hungary at the VinCE wine extravaganza (this year to be held April 25-27 in the Várkert Bazar, details of masterclasses yet to be announced), has been portrayed on screen

by Alan Rickman. Spurrier has now turned his hand to making sparkling wine in Dorset, England, and released his memoirs, “Wine - a Way of Life”, last year.

For further Furmint action and a lot more, involving other Tokaj grapes like the sometimes sublime Hárslvelű, there’s the grand tasting of Tokaj Március, coming up on Saturday, March 23, at the Corinthia Hotel Budapest, where almost 60 wineries will be showcasing their wares. New Tokaj wineries are shooting up like mushrooms, way beyond the regions strongholds of Mád and Tokaj town itself.

Emerging Name

Kvaszinger, from Olaszliszka, is an emerging name that impressed me at the Furmint February tasting. His single vineyard Hatalos Furmint 2017 comes from Szegilong, and was fermented and aged (for six months) in used oak barrels; it strikes a lovely balance between freshness with its zesty acidity, citrusy fruitiness and depth with its slightly creamy texture.

Vintners interact with tasters at this year’s Furmint February.

László Kvaszinger, a member of Tokaj Generation Y, an association of talented young vintners, is also winemaker at TR Művek and will be present, representing his own winery, at Tokaj Március. Dry Furmints, especially the single-vineyard bottlings, are getting rather expensive but this is great value at HUF 3,500 from Borbolt.hu.

The organizers of Furmint February also know how good Hárslevelű can be and are planning this year’s edition of Hárslevelűk Éjszakája for Thursday, May 30.

Meanwhile, winemakers from Eger and Szekszárd are set to lock horns at this year’s edition of the Eger-Szekszárd Bikavér párbaj (duel) in the Grand Ballroom of the Corinthia on Friday,

February 22, with 34 producers in attendance, 17 from each region.

“It’s more of a Bikavér duet than a duel,” says Szekszárd winemaker Csaba Vesztergombi, about the upcoming tasting, though he does emphasize the individuality of the two regions.

“There are huge differences between Eger and Szekszárd despite Szekszárd only being

some

130 km

south of Eger,” he said, referring to soil and climatic factors. Cooler Eger is based on volcanic rhyolite tuff and brown forest soils plus some limestone, while warmer Szekszárd has loess and red clay with some pockets of limestone.

From the Eger camp, Tibor Gál described Bikavér from Eger as fruitier, dynamic, mineral and leaner than the wider, broader and fuller-bodied style from Szekszárd. Gál’s vibrantly fruity Titi Egri Bikavér 2016 fits that bill to a tee with a nice deep ruby color, sour cherry, cherry, eucalyptus, mixed spices and a touch of an earthy note, with fine grained tannins and a tangy finish.

This is a blend of Kékfrankos, Kadarka, Cabernet Franc, Cabernet Sauvignon, Syrah, Pinot Noir and Portugieser, harvested from the volcanic rhyolite tuff of the Síkhegy, Pajdos and Tornyos vineyards. It was spontaneously fermented in vats and aged for 11 months in Hungarian oak barrels (20% new oak), and is unfiltered and unfined. It costs HUF 3,250 from Bortársaság.

Key Wine Style

Bikavér is a key wine style for Hungary that enables local heroes Kékfrankos and Kadarka (the latter traditionally mainly in Szekszárd, but now increasingly in Eger also), to combine with the international grape brigade to delicious effect.

Many winemakers appear to have settled on a rough ratio

of

50%

from the two local grapes with Kékfrankos often at 45% and Kadarka at 5%. Kékfrankos provides the lean and focused backbone for most Bikavér, but it is fleshed out delightfully by fuller bodied and more intense grape varieties like Cabernet Franc (particularly good in Hungary), Cabernet Sauvignon and Merlot, among others, although Zweigelt and Blauburger, both parented by Kékfrankos can put in an appearance.

Vintners from both regions tend to shun the use of the English translation for Bikavér (Bull’s Blood), due to the negative conations of much of the bottom shelf stuff put out during the communist era.

In the meantime, Hungary’s largest indoor tasting of the year, Borjour Magnum (now in its tenth year), which features 220 Hungarian winemakers/wineries serving more than 1,000 wines takes place at Millenáris tomorrow (February 16) from 3-9 p.m.

One major event that will not be happening in 2019, however, is the Great Tokaj Auction, as the winemakers take stock of what is a fine idea and a very pleasant event, but sadly one that doesn’t seem to have attracted that many bidders as yet.

Tickets for the Tokaj Március grand tasting at the Corinthia Hotel Budapest will cost HUF 11,900 on the day, see tokajimarcius.hu for more details.

Tickets for the Szekszárd Bikavér párbaj, also in the Corinthia, will cost HUF 6,000.

Borjour Magnum tickets at Millenáris will cost HUF 7,900, discover more at borjour.hu

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