Hungarian PM cuts local business tax, Budapest's opposition mayor cries foul

BUDAPEST (Reuters) - Hungary’s government will extend a moratorium on household and business loan repayments until July and halve a local business tax collected by municipalities, a move strongly criticised on Saturday by Budapest’s opposition lord mayor.

FILE PHOTO: Hungary's Prime Minister Viktor Orban leaves an EU summit amid the coronavirus disease (COVID-19) outbreak in Brussels, Belgium December 11, 2020. Fransisco Seco/Pool via REUTERS

Prime Minister Viktor Orban announced that local tax for small and medium-sized businesses would be halved from Jan. 1 to support jobs during the coronavirus crisis.

The local business tax is a vital source of revenue for municipalities. Opposition leaders said the tax cut would jeopardise public services and allow the nationalist government to exert political pressure on cities.

Orban said towns with fewer than 25,000 inhabitants would receive support from the government, while the financial situation of bigger municipalities would be “considered one by one.”

“Halving this tax does not manage this crisis, but deepens it,” Budapest’s lord mayor Gergely Karacsony, a liberal sociologist, said on his Facebook page.

The opposition amalgamated in October 2019 and handed Orban’s party its first major setback, wrestling back control of Budapest and some other big cities in a local municipal election.

Orban, in power for a decade, faces tough elections in 2022, fighting the effects of the pandemic against an opposition that has unified for the first time to unseat him.

The government projects gross domestic output will shrink by about 6% in 2020 as a result of the pandemic.

Orban said on Saturday that the government will cover two-thirds of wage costs of businesses in December and January that have to temporarily close in the tourism and hotel sector, as well as restaurants and private bus companies.

Families with children or expecting a child will be eligible for a preferential loan of up to 6 million forints and non-refundable grants to renovate their homes.

“We made these decisions...and we hope we can save several hundred thousands of jobs,” Orban said.

Reporting by Krisztina Than; Editing by Alexander Smith and Christina Fincher