Hungarian Parliament Has Voted On The Telecom Services Tax

  • 21 May 2012 9:00 AM
Hungarian Parliament Has Voted On The Telecom Services Tax
The next step is taken in order to establish long term fiscal sustainability and reduce general government debt. Due to the slowing of the European economy and the protracted euro-zone crisis, the European Commission forecasts lower growth for 2012 and 2013, and therefore the government has decided to implement measures aimed at fiscal improvement.

The measures aimed at fiscal improvements – which include provisions both for cutting expenditures and increasing revenues – enable Hungary to achieve in a sustainable way the formerly projected deficit targets of 2.5 percent for 2012 and 2.2 percent for 2013.

One of the revenue-boosting measures is the telecom services tax, for which a basic principle has been that it should be applicable to a large number of people and should have a low tax rate.

Another principle has been that the new tax should fit well into the ongoing tax reform in which liabilities have been shifted from incomes to consumption and sales. Every economic study concludes that taxes on consumption and sales are the kinds which distort the economy and hamper growth in the smallest possible degree. Furthermore, taxes on consumption and sales are more proportionate from a social viewpoint, because the wealthy pay more as they also consume more.

After the above requirements had been met, last week the government submitted to parliament the bill on the telecom tax, which has been adopted without amendments by the National Assembly earlier today.

The new tax is a sales-type liability, which is levied on fixed line or mobile phone calls or messages via the electronic telecommunication network of Hungary. The tax is 2HUF/minute and 2HUF/SMS or MMS. The tax bearer is the service provider, which is obliged to declare the tax and pay it until the 20th of the month after the call was made or the message forwarded. The exception to this rule is the first period, July, when the tax shall be declared and paid in September instead of August. Tax liability, however, is in place already in July.

According to the regulation adopted now, tax is exempted for emergency calls, calls and messages to charity donation numbers, test calls and calls to European harmonized numbers. The objective of the exemptions provided by the law is to exempt the service provider from paying tax in certain cases of common interest and technical calls related to network maintenance.

In addition, the service provider is exempt of paying tax for up to 10 minutes of monthly usage for private customers. The objective of this exemption is to prevent the service provider from raising service fees with reference to the tax on the one hand. On the other hand, this provision provides an opportunity for the service provider to establish a pricing policy which favors private customers, that is, to offer better prices for private persons.

Furthermore, the tax is capped for the subscriber, as the payable tax is limited at 700HUF/month/phone number for private customers and 2500HUF/month/phone number for corporate customers.

As far as fiscal revenues are concerned, 44-45bn HUF annual revenues are expected from the new tax. As it is implemented from 1 July, revenues for this year will be half of that amount.

The government does not believe that the new tax will be shifted to subscribers, because market competition will prevent it. This argument has been also proven right by the consumer price indices of the sector in the last couple of years. Furthermore, tax shifting is not justified as from 1 January 2013 crisis tax for telecom service providers will be phased out and thus tax liabilities of the sector will be also reduced.

The sectors which are eligible for paying the telecom services tax will substantially assist Hungary to improve fiscal balance, reduce the level of government debt and thereby establish a stable economic background for enterprises which have been investing or plan to invest in Hungary.

(Ministry for National Economy)

Source: kormany.hu

  • How does this content make you feel?