Portfolio blogger

Saturday, December 31, 2011

Happy new year

Has all been said? I am afraid, almost all has - at least about important issues. But maybe a lot only in Hungarian - although never has been Hungary as much in the news as nowadays. But small things are as annoying as anything: that the "government" tv shows the Krishna community distributing food for the needy and then shows the account number of another foundation (close to the government). The Krishna community, by the way, was illegally established under communism, by an emigree who was smuggled into Hungary in women's clothes. The introduction of a Suzuki (the factory is situated in the community where the ex-mayor from FIDESZ did not want to cede power to the newly elected independent and the FIDESZ group in the communal assembly is making the work of the new mayor impossible) destined for handicapped which is not a special version and eliminating from the interview with the president of the association of the handicapped all criticism he voiced.
A letter from the prime minister to the public servants offering them the possibility to take out a subsidised loan to repay their forex-based credits at a fixed exchange rate, calling the loans forex-covered loans, with further grammatical errors and some further queer statements.
The chief whip of FIDESZ in parliament and mayor of Hungary's most indebted city (who had an equipment on his luxury car bought from public money which blocks police speeding indicators) writing a letter to thee bank who lent in Swiss francs to his ciy threatening with new legislative instruments against them if they do not take over part of their exchange losses.
The serious questions remain: who will stop this amok? And how can this be stopped without causing immense pain to the people of Hungary and without enabling the hard core of the right to show it as foreign intervention against the interest of the Hungarians? The two requirements are actually in contradiction with each-other: the bigger the pain in the country, the smaller the credibility of the present policy and thus the smaller the convincing power of the arguments that it was foreign speculation and intervention which made the "freedom fight" of the government to fail.
So those who want to change, have to tread carefully: search those internal forces - even within FIDESZ - who could stop this (I could not find a politically correct expression here).

Saturday, December 24, 2011

Christmas upheavals

A lot hsa been written about the events with the IMF? the EU and around parliament. I may come back to this, but for now something I discovered during reading about them and which may help to step one step back and maybe r-think certain things: Michel Sandel on justice

Monday, December 12, 2011

The European council decisions

Too much has been said about the no/maybe/yes/I will ask the Parliament response of the Hungarian prime minister to the new Euro pact.
He had one good remark in the runoff to it: he sad that an intergovernmental solution to the problem is not a good one. But the reason of his "naysaying" was not that. He expressed quite a couple of times that he wants to retain the possibility of Hungary to make tax competition to the other European states (see the part on the Euro-plus pact in my previous post How did the Hungarian presidency do?).
The reference to the need for a parliamentary approval also is a pretext only, there is no need for that in case of a Council declaration - ratification of treaties comes after the signature by the heads of government and state and this is not even a treaty yet. Ms Merkel, who needs that, had the discussion in the Bundestag before going to the Council meeting (which can also be called summit, see later).
But in the conundrum about Britain's "no", the two references to the need to have the parliaments approve (Sweden and the Czech Republic) the Hungarian reaction mostly went unmentioned by a lot of commentators. But what was totally forgotten, was what the way the decision will be implemented, means for the EU.
A little off: a lot was said before what Germany and what France wanted, among others in the debate of the Bundestag, so it was no surprise for anybody. But Merkel mentioned there more important changes she wanted to achieve with a change to the Treaties (the legal framework of the EU) - a step towards more intergovernmentalism - powers for the Council and the European Parliament to propose legislation, which now is the privilege of the Commission. She did not directly succeed in that. An indirect blow was, however suffered by the present decisionmaking structures of the EU: the changes will be implemented by intergovernmental treaties instead of a change to the Treaties of the EU themselves. And thus, a precedent was set to circumvent the existing legal framework. Of course, a change to the treaties would have needed a referendum, in particular in Ireland and the U.K. (well, the U.K. failed to agree anyway...) while international treaties are normally ratified by the national parliaments only. That is actually why this Council meeting is also a summit.
So wait and see, what will happen.
Do the governments want the Commission to be the executive organ also behind this system, i.e. check and sanction the implementation of intergovernmental treaties - what will be the legal base for that? If the Commmission accepts, will it be an increase of its powers or the acceptance of the start of (no, not of a beautiful friendship à la "Casablanca") a new decision mechanism in the EU which is paralel to the one which exists? Or will the Council organisation be enhanced for that and thus really create paralel structures - the six point economic package has just entered into force and will immediately get competition?

Sunday, December 4, 2011

Extraordinary taxes covering government mistakes

The law about the transitional rules of the coming into force of the new constitution contain - beyond the controversial pseudo-historic tirades about the guilt of the communist party (Hungarian Socialist Workers' Party) and that the Hungarian Socialist Party shares these guilts, contains a small hidden paragraph: If as consequence of a judgement of the European Court of Justice or the Constitutional Court a payment obligation is arising, a specific tax can be levied and the receipts of this tax can only be used to pay this obligation.
The latter phrase is intended to give a fair countenance to the new tax. Let's go a little beyond the plausible (and somewhat populist) argument, that this means that the government can have the people pay for its errors, and let us go a little deeper.
A tax is a contribution from a certain group of people or organisations to the common tasks (of the government or the municipalities). It is based on an income or a property of the taxable person (but can be a flat tax per person). It can reasonably be expected that the tax base is in correlation with the benefit which the taxable person draws from the service the tax is financing (of course this is very theoretical but local taxes are, for example, based on the revenue or property in a certain locality)
The new basic law actually replaced the term "proportional to property and income relations" by "according to the capability of bearing the load" in the part about taxation. This means that as long as someone is able to pay the tax, that person can be taxed even if another, better off person will not be taxed accordingly.
So who will be the subject of this tax? Those who brought the case in question to the court? Or those who can profit from the court judgement, thus neutralising the effect of the judgement? Dangerous questions.
It is even more difficult to find out what the tax base will be. If it will be a flat tax, it can hurt even the stipulation of capacity which replaced proportionality. And by the way, what will happen to the amount not needed to cover the payment obligation? Or will they just collect this amount: OK, we have to pay x forints (if euros, the exchang rate will also distort the picture), we want y people to pay for it, so everybody pays x/y?
One example: a judgement is already here: the deductible VAT cannot be retained till the invoice on which the tax is accruing, has been paid. This will meant about one to two hundred billion forints (about 350 to 700 million Euro) of payment for the state. This, however, is mostly just brought forward, when we assume that these invoices will be paid. But it is realistic to assume, given the dear state of state finances, that a levy may be raised for that. Who will be the subjects? All who reclaim VAT have to pay 2% of the amount reclaimed into the budget? I am afraid more bizarre ideas will originate in governmental heads.
More dangerous is the political effect: the government can always stigmatise those who go to court to avoid any, however unjustified measure: The people have to pay an extra tax because they went to court (if the measure is justified, it is reasonable to assume the court will approve it).