The coordination council of employers, employees and municipal representatives (Főét) has suggested that Budapest should be compensated from central coffers for lost business tax revenues so that “it can perform its public tasks at a high level”, Mayor Gergely Karácsony said on Facebook.
Karácsony said Főét had held a meeting earlier in the day where participants discussed possible ramifications of the government suspending the business tax as a result of the coronavirus pandemic. He said that losing further revenues could “force the local government to take steps that would significantly impact the infrastructure and public services for businesses and residents”.
The government should pay full compensation to local councils for their losses in local business tax revenue, Karácsony said after talks between government representatives and local government alliances on Thursday. As part of its coronavirus crisis relief, the central government has halved the local business tax this year for companies with annual turnover of under 4 billion forints (EUR 11.1m) and fewer than 250 people on payroll. Karácsony, who is a co-leader of the alliance of local governments MÖSZ and head of the alliance of Budapest local councils BÖSZ, told an online press conference that at the meeting both alliances had represented the position that local governments should be compensated.
The technical details of this are close to being finalised in the cases of municipalities with fewer than 25,000 residents, the mayor said, adding that there was “no reason” why larger municipalities could not also receive compensation. He noted, however, that the government had yet to respond to the proposal. Budapest is asking for compensation because it does not want to risk a drop in the quality of the public services it oversees, Karácsony said. Therefore, Budapest is asking companies that can afford it to pay the full business tax, he added.
In response to a question about whether the government would be willing to satisfy Karácsony’s demands, Gergely Gulyás, the prime minister’s chief of staff told a government press briefing that there was an openness on the government side for talks with the metropolitan council and other city leaders. He added that Budapest maintained a very costly office in Brussels which was involved in lobbying for direct support from the European Union. “If the government can help in this area, it is at Karácsony’s service,” he added. Gulyás said the government was “not treating the capital as a stepchild”, insisting that Budapest was the biggest winner of developments over the past decade.