11 thoughts on “Whoops!

  1. So Audi is getting cold feet eh?

    This just goes to show that you can’t tax your way out of this one, at least not at this stage. I mean, the sh’t is and has already hitting/hit the fan as far as I am concerned. Hungary is in for a difficult time.

    “After all, if you don’t increase exports, the only way you can reduce a current account deficit is to reduce imports, which means reducing the standard of living…”

    Oh yes Alex, this seems to be the silver lining here and for all the efforts of Hungary’s government to conjure taxes and modes of finance tightening the belt seems to be an inevitability here.

  2. It seems especially futile given that other EU members, especially the 2004 intake, have emphasised lower corporate taxation. It looks like they’re stuck at Stage 2 of crisis management (Stage 1 being denial) in which crisis resolution is based too heavily on pursuing revenue rather than cutting spending.

  3. I work with investment planning in a global corporation. We also have operations in Hungary. I can tell you that no one cancels $1 billion worth of investments simply on the basis of a 4% corporate tax increase.

    Audi is simply using the tax increase as an excuse for a decision they had already made. Hey, Hungary is no longer has the cheapest labor (Slovakia, Romania and, of course, China have lower wages), the best location (Poland and the Czech R.) or the political stability (Estonia).

  4. They are increasing the tax on profits from 16% to 20%. 20% is still among the lowest tax rates in EU.

  5. So they should stop taxing mobile international capital and just tax the local rich. Put up taxes on those earning $10,000 or more, or whatever variant of that works best.

  6. You state as a matter of fact that the Hungarians are:

    “pushed around by an arrogant German multinational.”

    You do not explain why VW-Audi is an “arrogant” German multinational. What makes it arrogant, or rather what has it done in Hungary or elsewhere to deserve the adjetive “arrogant”? The article mentions nothing about this company’s arrogant or pushy activities in Hungary, other than they are the biggest exporter and presumably a key asset to the national economy. Is this something we are supposed to take for granted, that anything associated with the word “German”, must be pushy and arrogant? Would you please explain?

  7. Interesting. I remember A few months ago, the FT reported that the IMF was sceptical about Hungarian plans for balancing the budget on the basis of tax rises. IMF point was simply that tax income is not a linear function of tax levels.

    QED

    Also, I don’t see why you can claim that Hungary is being pushed around by an arrogant multinational. What obligation have VW to invest its money in Gyor if it can invest it more effectively somewhere else. By this argument, my home town, Belfast, is also being pushed around by VW, since it hasn’t invested its billion euros there either.

  8. Perhaps VW sgould pull out of Hungary so they can’t “push” it around any longer.

  9. Issue resolved! Companies can deduct R&D costs from the solidarity tax. It seems that this is taylored to Audi’s claims.

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