Help yourself – Will the state help you, too?

I’m warning you, maybe what I’m describing in my current blog posted today won’t increase my likes among readers. Of course, what is written strictly reflects my own subjective opinion, no one has to agree with it, just as I used to respect the opinions of others, other than mine.

Last time, I wrote about the means of successfully managing the economic crisis caused by an epidemy.

Of course, the Government has not been idle in recent weeks either, so let us run through it as a reminder of the provisions it has made to help businesses being in an unfavourable economic situation as a result of the epidemiological situation:

  • credit repayment moratorium
  • state aid for reduced-time employment (kurzarbeit)
  • Delaying deadlines for reporting and paying taxes
  • The deadline for the declaration and payment of corporation tax and the return of the company tax withholding tax to be fulfilled at the same time as the annual tax return will be changed to 30 September 2020.
  • The deadline for the declaration and payment of KIVA and for the establishment and declaration of the KIVA will also be changed to 30 September 2020.
  • The deadline for the declaration and payment of local business tax and the declaration of withholding tax for the next advance tax period will also be changed to 30 September 2020.
  • The deadline for the declaration and payment of the innovation contribution and the declaration of the initiation contribution to be made at the same time as the annual contribution declaration will be changed to 30 September 2020.
  • The taxpayer may apply for a reducement of this withholding tax or contribution before it is due if according to its calculations, the tax or contribution for the tax year beginning in 2020 is less than the amount of advance tax or advance contribution.
  • The deadlines for preparation, disclosure, deposit and publication of annual reports under the Accounting Act, as well as for submission will be extended until 30 September 2020.

At this point, let’s stop for a while:

Should we consider or not?

As we know, according to the Government’s decree, among other things the deadline for submission annual accounts has been changed from 31 May 2020 to 30 September 2020. It is also recommended to examine when it is worht and when it is not worth using this deferral option. Let us consider the other consequences of the report being prepared only on 30 September. One of the most important roles of published annual accounts in the economy is to maintain financial confidence among economic operators. If an enterprise does not publish its accounts, individual economic operators may consider it to be an alarming sign that the economic consequences for the Company constitute a serious financial crisis.

However, the role of the annual report is valued up when a company borrows a loan or its suppliers determine the payment deadlines on the basis of the Company’s financial situation. The annual account, in a sense, is a guarantee that a Company will be able to fulfil its payments; thus reducing the risk to suppliers and creditors.

As a result of the economic crisis due to the coronavirus, many businesses are expected to be insolvent by 30 September 2020. They will certainly not publish their accounts before this deadline. Therefore, if the Company is not at such a risk, it is not worth deferring the accounts.

Moreover, reports published on time may reveal a number of important information that may strengthen confidence in the business. On the one hand, whether it has sufficient reserves for the crisis. The previous year’s report also shows the likely impact of the restrictions on the company due to the coronavirus. If the Company is required to audit, this will be rigorously measured by the auditors, in this respect investigations will be carried out and if it is deemed necessary, the expected impact will be included in the auditor’s report in some form.

If there is a situation which makes it impossible to prepare the accounts by the original deadline, the postponement seems to be a good solution, but in this case it is not mandatory to wait until 30 September, but report has to be prepare and submitted as soon as the obstructive circumstance has ceased.

Let us continue to take account of the measures:

  • Small business tax (KIVA) is reduced. Although it is not directly related to the management of the crisis situation, as from 1 January 2021 the small business tax rate will be reduced from 12 percent to 11 percent, the timing of the announcement was suitable for the publication of a government communication with positive content
  • The overall amounts of fringe benefits that can be given to the SZÉP card has been increased and exempted from the social contribution tax.
  • Suspension of the tourist tax (IFA) for guest nights from 26 April 2020 to 31 December 2020
  • Social contribution tax will fall from 17.5 per cent to 15.5 per cent from 1 July 2020
  • In the context of the mid-year reduction in the social contribution tax, the EKHO payable by the disbursing agent will be reduced to 15.5 per cent.
  • The tax authority shall allow the taxpayer to defer payment of up to HUF 5 million registered with the tax authority, once, for a maximum of six months’ bonus-free payment or for a maximum of 12 months’ worth of instalments, if the applicant proves or makes it likely at the same time as submitting the application that the difficulty in payment is due to the emergency.
  • contracts for tourism, catering, entertainment, gambling, film, performing arts, event planning and sports services sectors shall not be terminated by 30 June 2020 and the fee shall not be increased.
  • In the above sectors, for the months of March, April, May and June 2020, in the case of employed workers, the employer is exempt from paying the public burden on wages, and of the contributions on the worker’s wages, there is only the obligation to pay health insurance contributions in kind, provided that its monthly rate cannot exceed HUF 7710, the monthly amount of the health service contribution.

Businesses (employers, self-employed and social entrepreneurs) who carry out the following activity identified by the TEÁOR and TESOR numbers as actual main activities:

  1. a) taxi passenger transport (TEÁOR and TESZOR 49.32),
  2. b) accommodation service (TEÁOR and TESZOR 55),
  3. c) hospitality (TEÁOR and TESZOR 56),
  4. d) creative-, art, entertaining activity (TEÁOR and TESZOR 90),
  5. e) sport-, entertaining and leisure activity (TEÁOR and TESZOR 93),
  6. f) gambling, bet (TEÁOR and TESZOR 92),
  7. g) film, video, production of tv programmes, publishing of sound recordings (TEÁOR and TESZOR 59),
  8. h) conference, organisation of a trade show (TEÁOR and TESZOR 82.30),
  9. i) newspaper publishing (TEÁOR and TESZOR 58.13),
  10. j) journal and periodical publication (TEÁOR and TESZOR 58.14) and
  11. k) programme setting, broadcasting (TEÁOR and TESZOR 60).

no social contribution tax and vocational training contributions are due for the months of March, April, May and June 2020, and only two thirds of the rehabilitation contribution obligation is to be paid.

It also applies to the a.m. enterprises that the KIVA taxable person, in the context of this activity of, the amount of personal payments should not be regarded as a KIVA fund when determining its small business tax liability for the months of March, April, May and June 2020, i.e. they do not have to pay taxes.

The KATA enterpreneurs couldn’t have been left out either, of them

  1. taxi passenger transport (TEÁOR and TESZOR 4932),
  2. hairdressing, beauty (TEÁOR and TESZOR 9602),
  3. painting, glazing (TEÁOR and TESZOR 4334),
  4. other human health care (TEÁOR and TESZOR 8690),
  5. electrical installation (TEÁOR and TESZOR 4321),
  6. physical well-being service (TEÁOR and TESZOR 9604),
  7. performing arts (TEÁOR and TESZOR 9001),
  8. installation of water, gas, heating and air conditioning (TEÁOR and TESZOR 4322),
  9. specialist outpatient care (TEÁOR and TESZOR 8622),
  10. installation of a building-joiner structure (TEÁOR and TESZOR 4332),
  11. sport, leisure training (TEÁOR and TESZOR 8551),
  12. roofing, roof construction (TEÁOR and TESZOR 4391),
  13. general outpatient care (TEÁOR and TESZOR 8621),
  14. flooring, wall covering (TEÁOR and TESZOR 4333),
  15. dental outpatient care (TEÁOR and TESZOR 8623),
  16. activities complementary to performing arts (TEÁOR and TESZOR 9002),
  17. other sport activity (TEÁOR and TESZOR 9319),
  18. inpatient care (TEÁOR and TESZOR 8610),
  19. organizaion of conferences and trade shows (TEÁOR and TESZOR 8230),
  20. holiday and other temporary accommodation services (TEÁOR and TESZOR 5520),
  21. body training services (TEÁOR and TESZOR 9313),
  22. other hospitality (TEÁOR and TESZOR 5629),
  23. other accommodation service (TEÁOR and TESZOR 5590),
  24. gambling, bet (TEÁOR and TESZOR9200),
  25. social care for the elderly and disabled without residential housing (TEÁOR and TESZOR 8810)
  26. hotel service (TEÁOR and TESZOR 5510)

are engaged the a.m. activities (hereinafter referred to as “exempted activities”) in view of the months of March, April, May and June 2020, the small taxpayer will be exempt from paying KATA tax.

It is a nice little list, isn’t it?

But the state has really helped those who should have been most?

Don’t give them fish, teach them how to fish

„Don’t give the hungry fish, because it only eats his well once. Give him a net, teach him to fish and then he will have his whole life to eat and make money.”

And here’s the part that makes a lot of people attack me, but I’m taking my opinion.

What is the notion of enterprise?

„The enterprise is such an economic unit which, on its own behalf and at its own risk, is commercially active, separate from market participants in its activities and in its ownership, but which is related to them by the market, seeks to make a profit and takes risks to that end. So the entrepreneur carries on his activities at his own risk, and the profits are his and also the loss if the business doesn’t work out.

Transitional measures may obviously be necessary in such an extraordinary situation, but if we look at the Government’s measures strictly from an economic point of view, they were more aimed at obtaining a sense of public satisfaction and were of an ad hoc nature than a real concept. I stress that this is not a political opinion, but only a professional opinion.

Before we really daringly hit the ground, let’s clarify one more basic notion: public burden-bearing

Public burden-bearing, in very simple terms, expresses that everyone pays taxes. Its essence is that one of the justice-equity aspects of the tax system (in addition to utience) is the principle of public burden-bearer capacity (or equal benefit sacrifice).

According to the principal of utience, a tax system is fair when the tax burden is borne by taxpayers in proportion to their share of public expenditure.

According to the principle of public burden-bearing capacity, everyone should take their share of public expenditure financing in proportion to their burden-bearing capacity, and everyone should be subject to the same tax burden that result in renunciation of the same utility as the others have.

I would like to draw attention to two important parts: they bear the tax burden in proportion to the way they share in public expenditure and tax at a rate that results in a renunciation of the same utility as the others have.

In my book: if you don’t pay taxes, my dear friend, don’t ask for welfare if you’re in trouble. I mean, don’t want to take anything out of the basket unless you’ve already put something in it. And if you pay little tax, i.e. you give up on your little profit, and thus you contribute little to public spending, then don’t even want a disproportionate re-flow.

It has long been my steed that, in my opinion, there are still too many businesses in Hungary. I would like to be clear: too many enterprises who are not aware of the content and meaning of the basic concept of enterprise and public burden-bearing. In fact, anyone can have a business, regardless of whether they even know something about how to run a business. For the operation of a business, it is not enough to have the professional knowledge of the area in which it is run, but it should also have certain basic business knowledge and social responsibility for the citizens who set up the business and subsequently operate it. My strong point of view that I would only allow the issuing of an entrepreneurial pass or the approval of an application to set up a company if someone with excellent professional references would complete an entrepreneurial basics course where he or she would obtain some information on how to run a business. And then he or she could learn how to deal with a crisis situation and would not expect from others (the State) to get her or him out of the trouble he or she got.

With the current measures, the Government has helped precisely those sectors that pay the least tax into the budget anyway, as well as areas where tax morale is not very high anyway. Please contact anyone who has received a receipt or invoice from their hairdresser, the specialist called to your apartment, your private doctor’s order, your dentist, restaurant or pub?

Now, in this situation, the State was expected to help them, who had previously made minimal contributions to public burdens. Ladies and gentlemen, I’m sorry. I repeat, put something in the basket first so you can get it out of there in the future!

I wonder if the economic areas that are now in direct trouble as a result of the shutdown of the economy will take measures in the near future so that they do not re-enter this situation in a similar case? Either in their own business or at sectoral level. Can anyone imagine a version where, for example, taxi drivers or caterers set up a joint aid fund, into which everyone in the sector pays a certain amount month after month, from which the enterprise in need could receive temporary aid in such cases? It’s a long shot, isn’t it? Because in peacetime, everyone bakes their own steaks, but when there’s trouble, they yell “help, help.” Why should self-employed persons who benefit from the KATA who enjoy a market advantage by paying only HUF 50000 in tax and contributions from their income of HUF 1 million per month (i.e. 5% of the summ tax and contribution burden!!!) now receive help from the State?

And those, who have already paid a lot of taxes, who run their business responsibly, have made a reserve, who are also willing to temporarily forgo their profits in order to maintain their business and keep the workers, do not receive any support? Actually, they don’t have to, because the market is fair this way. Like in the animal kingdom: the strong survive, the weak fall. Maybe that’s not a very nice and social point of view, but that’s not what business is about. The market is tough and sometimes ruthless. And that, too, should be learned by those who start a business.

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