Commentary

You Can’t Just Make a Little Money Legally

If a low-skilled, unemployed man or a house-trapped young mother could make a few bucks by selling handmade embroidery or mowing someone’s lawn, you would encourage them to do so. Yet, it is not possible to make just a little money in Hungary – not legally.

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If someone would ask you whether they should have a side hustle, you would tell them of course they should. Especially low-skilled, unemployed people. They are routinely accused of being work-shy, every single one of them, and not even looking for opportunities. So when their problem comes up, everyone is full of condescending advice on how they should work for every penny they could earn – and not just wait for welfare handouts. And no one is more condescending and eager to blame poor people and cut welfare payments that the Hungarian government.

Yet, it is legally impossible to make just a little money in Hungary.

A housewife was trying to start a side hustle, selling embroidery online. We are not talking about fortunes, just a few thousands forints, less than a hundred euros a month. But this is the country where the full time minimal wage is around 300 euros and the state can employ workers for even less. And women in Hungary are trapped at home for three years per child – on a pittance. Of course she would give it a try.

But she ran into the well-known problem of taxation. If you are a housewife on Etsy (or a good-for-nothing unemployed man doing the odd jobs), there are 3 ways to pay taxes after your income.

  1. Register as private person with a tax number for business purposes. The tax office often recommends this option, but that doesn’t mean you should believe them. There are huge differences in the interpretation of what it means to have a not “regular and businesslike” activity. And if the auditor understands it differently than you, you get fined out of your little mind. In the end, registering just invites abuse and gives you tax-anxiety because there is no way to ensure that you won’t get fined. Paying taxes after your income does not protect you from fines.
  2. Become a subject of “simplified entrepreneurial scheme” (KATA). It looks tempting if you are a full-time freelancer. You have to pay a fix tax every month (approx. 180 euros) regardless of your income and that’s it. But how does that help our housewife with little and/or irregular income? 180 a month is a fortune for those who need side hustles the most. (Until last year this scheme even had an upper limit of around 1800 euros a month in earnings – and if you earned above that, you would get automatically punished. It also didn’t sort out the problem of accepting payments in foreign currencies.)
  3. Individual entrepreneur. It comes with fix costs of around 180-360 euros per months (conservatively) and you have to hire an accountant as well to comply with the billion regulations. Even a bank account costs a fortune of you try this. The other name Hungarians have for this is “forced entrepreneur” – someone who would much rather be employed.

Not-quite-legal options for such a silly housewife (or unemployed struggler) would include:

  1. Try to buy invoices from someone else (who is an active entrepreneur) to cover your own ass for selling embroideries.
  2. Try to sell it black, keep a low profile, and if a stranger offers to buy your stuff, say no. Tax auditors are very keen to hunt down small fish because they are not allowed to go after the big ones with political connections.

Tempting? I thought not.

What a western European reader probably doesn’t understand is that the tax authorities of less fortunate countries are actively hostile to honest taxpayers. They don’t just check whether you paid up – they are just looking for an excuse to fine you on top of your taxes. So when it comes to a tax audit, paying your taxes does not give you any safety. Taxmen are coming to find out what they will fine you for. In fact, the auditors have a collection target – but not on taxes, but fines.

The assumption of guilt is their default setting – and by guilt I don’t mean trying to hide money from taxation. A complex tax code means that there is virtually no way to obey every single rule at the same time – not to mention every possible interpretation of the same rule – and the frequently changing rules baffle even seasoned accountants.

Headline tax rates are great to attract naive foreigners to your country. What they don’t show is that we still have over 60 types of taxes, a billion rules that can bring you a fine, and it takes the longest to file your taxes in the European Union. Not mention professionally hostile auditors.

So next time you feel the compulsion to trash those work-shy scoundrels who don’t pick up the pennies when they could – please add to your rant that maybe they cannot do so legally. They may be priced out of the labor market by minimal wage laws, employers might be cautious to hire them due to a jungle of regulations surrounding employment, and finally, they can’t even have a side hustle to sell the little skills they have because there is literally no way to do so legally.

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