The Budapest Mayor recently announced that Budapest cannot pay additional taxes into the central budget. Critics argue that there should be enough funds for Budapest to pay these taxes. They argue that the lack of funds indicates mismanagement or another issue.
Budapest Announced It Can’t Pay More Taxes
Karácsony announced that Budapest will have to delay its payments into the central budget. These are five to 10 billion forints in total.
Meanwhile, he said that his government will file a lawsuit to reduce this solidarity contribution.
On top of that, Mayor Karácsony said that Budapest plans to suspend funding the government. He went further, saying that the city needs a package to make its financial situation last the rest of the year.
Karácsony says that Budapest hasn’t received utility subsidies. He compares this to the subsidies received by pro-government municipalities. He blames this on the austerity measures of the government.
Understanding the Solidarity Contribution
Importantly, the solidarity contribution works in an unusual way that makes it impossible for Budapest, or any municipality, not to pay it. The solidarity contribution is simply deducted from subsidies granted to the municipality.
The Hungarian State Treasury collects it immediately when paying aid. This fact makes it impossible for Budapest to simply say it will not pay the solidarity contribution; it is an automatic process.
Hungary uses this method to reduce its funding of wealthier municipalities. That, in turn, allows it to increase funding to poorer villages and towns.
Critics Argue There Should Be Enough Funds
According to critics, financial data shows that there should be enough funds. Mihály Varga, the Finance Minister, posted his criticism publicly on Facebook.
Specifically, Budapest expects more than HUF 271 billion (EUR 718 million) in business tax revenue this year. The budget also includes HUF 46 billion (EUR 121.8 million) of subsidies. Together, that gives Budapest HUF 317 billion (EUR 840 million). For reference, 2019 had combined revenues of HUF 130 billion (EUR 344 million) less.
Even accounting for the solidarity contribution, Budapest should have enough funds left over. That contribution is just HUF 57.8 billion (EUR 153 million). As such, there should be more than enough funds remaining.
Further Criticism Regarding Reserves
Varga’s criticism also pointed out that Budapest had HUF 214 billion in savings when Karácsony became mayor in 2019. Now, however, this is only HUF 25.5 billion.
Supporters Explain the Lack of Funds
Ambrus Kiss, the deputy mayor, explains where these savings and funds went. He admitted that when 2020 began, Budapest still had over HUF 186 billion.
However, he countered this by highlighting increases in Budapest’s spending. Between increases in public transport spending, wage increases, and subsidies, Budapest has spent HUF 190 billion more in recent years.
The mayor also explained some of the factors influencing the current lack of funds. Budapest hasn’t received its six-billion-forint grant to renovate the Chain Bridge. Budapest also pre-financed 11 billion forints for trolleybuses.
Karácsony Highlights Other Challenges and Achievements
In the same announcement, Karácsony put the financial challenges in perspective. He highlighted that his first year as mayor required him to tackle COVID. Looking back, Karácsony says Budapest handled the pandemic well. The fewest people died in the city, affecting Budapest the least out of all of Hungary.
Karácsony pointed out that despite the major challenges in the last half-year, Budapest still saved on energy services. He argues that his government overcame challenges that were unrelated to Hungarian domestic policies.
The Budapest mayor recently announced that the city cannot pay its taxes into the central budget and hopes to delay them. Critics wonder where the previously available funds went. The mayor and his supporters argue that there were relevant expenses and Budapest is treated unfairly financially.
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