In the last several months, Hungary announced taxes on the “extra profits” of various industries. These included the airline industry. Recently, the country fined Ryanair for increasing its prices to make up for this increase in taxes.
The fine is 300 million forints ($777,058). According to Hungary, this fine is for Ryanair violating consumer protections. The fine followed an investigation into Ryanair, which began in June. That investigation discovered “unfair trade practices.”
Ryanair Plans to Appeal
At the time the fine made the news, Ryanair had not yet received notice of any fine but had plans to appeal it if they received it. The airline called the reported fine “baseless.”
Specifically, Ryanair highlighted a law in the European Union that lets airlines set fares for flights within the EU. This law says that flight prices within the 27 nations that are part of the EU can be set without any national government interference. As such, Ryanair believes it would be able to overturn the fine in the EU courts.
The Goal of the Tax
The tax in question is a recent policy from Prime Minister Viktor Orban and his right-wing nationalist party. Orban argues that airlines, insurance, banking, energy companies, and other industries have seen “extra profits” due to COVID. Orban’s party also argues that certain companies are profiting from the sanctions on Russia from the EU or the war in Ukraine. Supporters of the tax argue that these companies should contribute to the economic recovery of the country using those excess profits.
Overall, the tax was designed to boost the Hungarian budget. News outlets say this was necessary following the reelection campaign, during which Orban spent a significant amount.
Part of the tax is 10 to 25 euros on passengers leaving from Hungary. The goal of the tax is to raise 815 billion forints ($2.1 billion). This would be used to maintain a program to keep energy bills down. It would also go towards supporting the military.
What Economists Say
According to the Associated Press, some economists have said that banking and fossil fuels, among other industries, are indeed making higher profits than normal. However, they also pointed out that most industries are not.
What Airlines Say
Right from the announcement of the tax, airlines and other industries have opposed it. Michael O’Leary, the Ryanair CEO, for example, called it “idiotic” and “highway robbery.” Ryanair had also called the tax “misguided” and said that it would likely hurt the country’s economy and tourism.
Ryanair also said that it would have to adjust its flights and growth plans. Instead of focusing on Hungarian traffic, the airline would focus its growth efforts on countries working to restore their air traffic.
Wizz Air has a similar viewpoint. According to Wizz Air, the airline industry won’t go back to its pre-pandemic profitability or revenue for a while. This tax will only delay that recovery.
The First of Such Fines
The fine that Hungary issued to Ryanair was the first in response to this issue. But Hungary has explicitly said that the increase in costs should not go to customers.
However, Ryanair was not the only company to plan on increasing prices to compensate for the tax. Wizz Air, the Hungarian budget airline, and easyJet, the British airline, also had plans to do so. The three airlines said they would increase ticket prices by about 10 Euros to compensate for the new tax.
Ryanair increased its prices to make up for the recent tax increase the company faced in Hungary. Now, Hungary is suing the airline for passing the tax cost onto consumers, which the country’s government had prohibited when announcing the tax. Ryanair has said it will appeal.
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