Portfolio blogger

Monday, May 28, 2012

Breaking news: New Hungarian Liberal Civic Party in the making!

OK, I was at least as bombastic as a tabloid but still: the first sentences of a programme have been published and another blog pőublished a similar call . This is not the first expression of desire but till now everybody just dreamt of it - and expected others to come up- but now someone at least was undertaking an initiative. In a normal environment, you could ask, what is a party initiative on a blog worth? In Hungary, however, the most politically active who do not belong to the mainstream parties are present in the blogosphere or on Facebook. Well, Orbán, the prime minister claimed in the European Parliament that they won the 2010 elections on the Internet and on Facebook. If this is (rightly) not convincing, think about the "Milla" who organised the most successful opposition demonstrations since FIDESZ is in government. This organisation gave birth to the party "Fourth Republic" . I am afraid that some explanation is due. The first republic was the one after the first World War, the second after the second, both were followed by communist rule. The third republic counts its days from since the system change, 1990. So the party wants to establish the fourth one, as the resources of the third one are depleted and there is imminent danger that a Putinist system will replace it. What are the chances of a liberal civic party? Can it gain sufficient votes? Is "civic" bourgeois or citoyen (the two different meaning of the Hungarian word "polgári" which I translated to civic? "Civic" is there in the name of FIDESZ, the now ruling party. They understand it (if at all) as supporting their clientèle, mainly the wealthy among them, by government interventionism (and even by unlawful methods which are justified by retroactive legislation or formalistic application and using gaps in the law). Apart from their support for the rich, they are not right wing, they practice social demagogy and state interventionism in everything including sexual morale, education, economy, culture... Jobbik is a nationalist populist party who wants to exit the EU and re-instate national ownership. The border on the extreme left in their economic programme (which is by far not coherent). LMP is an antiglobalistic green party. MSzP has implemented neo-liberal policies against its will and is widely seen as the party of people who only serve their own good. The Democratic Coalition of ex-prime minister Gyurcsány regards itself as a leftist liberal but also sees that it has a Socialist past and that it can only gain support by maintaining left-wing rethoric. The liberals and the conservative (were they?) MDF disappeared among scandals. This is a separate story in itself but not worth mentioning at the moment. So what are the chances? Right-wing in Hungary always meant nationalism. There is no one who can address the national questions in a way that would be European, progressive and realistic and at the same time appealing emotionally. Of course real liberal, pro-enterprise policies are missing and would appeal to a lot of "opinion-leaders" but would have a slim support in the countryside. Finally, the election system is such that one strong alliance could only defeat FIDESZ. The individual election constituencies are single-round, first-past-the-post and no validity limit is set. So if the 54% who cannot chose a party now do not vote, and there are six parties (which is realistic now), 9% is enough to win a seat. And the winner in the individual constituencies wins additional seats on the lists. So if a party wins the individual seats (50%) and some places on the lists, it can already even have 2/3 but surely a majority. Questions abound....

Thursday, May 17, 2012

Hungarian cases at the European Cout of Justice part 1 - some taxes

I collected some cases of the European Court of Justice in the area of consumer protection and taxes where Hungary was affected. I start with taxes, the second part will deal with consumer protection cases. Let’s start with a tax case where Hungary won against the Commission. The Court ruled in its judgement in the case C 253/09 about the deduction from the base of the personal income tax payable on the sale of property and about the deduction of the transfer tax paid on the purchase of property of the transfer tax paid on property sold by the same person (although it is paid by the buyer) that it is not discriminatory if only amounts paid for properties purchased can be deducted from the tax base of property sold where the property purchased is in Hungary. This sounds logical, as it was also established by the Court, saying that “there is a direct link between the tax advantage granted and the initial levy. First, that advantage and the tax levy are applied to one and the same person and, second, they both relate to the same tax” and “that the objective of the legislation at issue is to avoid – upon the purchase of a second principal residence in Hungary – the double taxation of the capital invested in the purchase of the previous residence that has been sold”. However, the Court looked a little further. Firstly it established that these rules constitute a discrimination but recognised that in light of the above arguments this discrimination is justified by pursuing and objective in public interest (i.e. to preserve the coherence of the tax system and also: "If taxpayers not having paid the tax at issue previously were able, under the tax regime at issue, to benefit from the tax advantage concerned, they would take unfair advantage of taxation that was not applicable to their previous purchase outside Hungary.") Interestingly, no specific arguments are found in the judgement about the transfer tax but the same logic would apply here, except that the tax in not paid by the same person (but was paid at the time of purchase by the seller, although on a value at that time).
The COurt made an interesting statement, by also giving its opinion about tax harmonisation: “While the property transactions carried out in other Member States might also have been subject to similar or even identical taxes to that at issue, it must be noted, however, that in the current stage of the development of EU law, the Member States enjoy a certain autonomy in the area of taxation provided they comply with EU law, and are not obliged therefore to adapt their own tax systems to the different systems of tax of the other Member States in order, inter alia, to eliminate the double taxation.” So, according to the Court, one way of further integration can be a harmonization of these taxes also and a mutual recognition of taxes paid in another member state.

This harmonization has relevance to a problem now widely discussed, the importance of which is secondary but some way emblematic. The issue is the registration tax and the amendment of the law about road transport, which introduced draconian fines for Hungarians who avoid the – very high though recently decreased – registration tax on passenger cars by registering their car in a neighbouring country where this tax does not exist or is lower. There is a European Directive on the harmonisation of car taxes, mainly targeted at the tax continuously paid in different countries on vehicles registered in that country. The annex to this directive lists a number of specific taxes in different countries but the registration tax in Hungary is not listed. There is also a draft directive, which wants to harmonise further the conditions of the obligation to re-register cars moved from one member state to another. In both the directive and the draft, there is a precise definition of the residence which defines where a car has to be registered and pay taxes. In contrast to this definition, the Hungarian law does not define residence but takes the registration in the residence register as a formal condition. There are two lists of conditions, one for the driver, which acknowledges the situation of those who are abroad temporarily (for work, for example) but the formulation of the conditions for the owner (operator) of the vehicle are chaotic. Driving a car rented abroad or registered on a foreign company – for which the driver may work – is, however, only authorised for one day for someone who does not have a temporary residence abroad. This is also causing problems. For those, however, who stay abroad but do not want to give up their permanent residence in Hungary (or have a temporary residence in Hungary) to go to Hungary in a car registered on their name can mean a fine of up to 3200 Euro and losing their car. This is clearly offending the freedom of establishment and of move within the EU and also the spirit of the mentioned directive, and the re-registration directive is still far away and has only partial impact. Recently a judgement of the Court in the joined cases C 578/10 to C 580/10, can mean some hope that at least when their case comes to the European Court of Justice, the Hungarian regulation may be declared contravening European Law. The judgement namely concerns the Dutch registration tax, and says: “that Article 56 EC must be interpreted as meaning that it precludes legislation of a Member State which requires residents who have borrowed a vehicle registered in another Member State from a resident of that State to pay, on first use of that vehicle on the national road network, the full amount of a tax normally due on registration of a vehicle in the first Member State, without taking account of the duration of the use of that vehicle on that road network and without that person being able to invoke a right to exemption or reimbursement where that vehicle is neither intended to be used essentially in the first Member State on a permanent basis nor, in fact, used in that way.”, which means that not only the tax paid regularly, but also the tax paid on registration cannot be levied on a vehicle which is not used “essentially in the” country “on a permanent basis”. By the way, the Hungarian registration tax was once subject to proceedings at the European Court of Justice (joined cases C-290/05 and C-333/05), when the question was again about proportionality (also referred to in the judgement in question), i.e. that the registration tax on used vehicles has to take into account the depreciation of the vehicle, i.e. can be levied only on basis of its real value and not on its purchase value.