The 2022 tax bill has been rubberstamped and includes a line that allows corporations to donate into Orbán’s loyalist foundations – and get a 300% state tax credit for it.
Forget Chinese debt and overpriced public procurements. This new tool is even more lucrative for kleptocrats than hosting the Olympic games. And if Orbán’s new tool goes unchallenged it will be the last and final innovation in kleptocracy that will end the war on the state in favor of kleptocrats.
It started with setting up asset management foundations and squirrelling away public assets and billions of taxpayer money into them. They were then staffed by Orbán with his loyalists for life. Then they were put out of the reach of any future government. Ever. And now they stand to receive corporate income taxes – and the state is obliged to give tax credit for it.
While you were all preoccupied with Biden’s new minimal corporate income tax scam, Orbán said eff it and upped his game. We can now pay taxes directly into his foundations and the state can only watch and reward it with tax credit. You wanted to increase taxes? There, do it! (Orbán’s government has been like an twisted jinn in more than one way, making you wish you hadn’t made a wish in the first place.)
Népszava spotted in the 2022 tax bill a line that allows corporations to start paying into these Orbánist foundations – and church-run institutions that were also set up as part of Orbán’s scheme to outsource public assets into circles loyal to him – and get 300% off from their tax base from the state. But don’t worry, only to the extent to their profits. They are not standing to turn a profit by paying negative income taxes. Not yet. And if said companies chose to donate assets to the foundations, they can write off 20% of it from their tax base.
If this is not the last move to outsource the state into whoever controls those foundations – I don’t know what is. State capture is a shy little virgin compared to this. There will be nothing a future government can do but watch its tax revenues going into funds of Orbán’s loyalists, who can not be removed, ever, and who are reigning over most (if not all) state assets. And get to keep the profit from that, too, because they also get various tax exemptions.
All Orbánist MPs could say about it is that they hope the opposition will treat them with methods abiding with the rule of law. They didn’t even try to justify the move – only expressed hope that they will be allowed to keep the wealth because the opposition would never do what they did.
Every aspect of this scheme has been tried and tested during Orbán’s 11-year reign.
They can also be defended with the age-old Orbánist line that other countries are also doing certain elements of it. Germans also use foundations for dodgy purposes and Americans let taxes slide as long as money is channeled through foundations. How can they protest against Orbán’s move then?
The foundation-model was first tested on one university, Corvinus, then extended to all but six universities in the country. After Trump lost and Orbán returned from Brussels deflated in late 2020, his first move was to enshrine the new legal entities in his basic law, cementing them into 2/3 majority legislation, and started shoveling funds into them for safekeeping by turbo loyalists.
The formal excuse of the massive public money hemorrhage were the universities and making Hungarians more ethnically minded and less liberal. But universities are just the front for the money grab. Outsourcing every state asset (cash, castles, agricultural land, marinas, shares in national champions, etc.) into foundations and then putting these foundations outside of the reach of any future government was the goal – higher education had nothing to do with it. For a start, it will still be funded by the state. Universities were probably chosen to front the theft because Orbán hoped to squirrel away the EU’s pandemic recovery fund into them. And because they sound so holy.
Paying corporate taxes into Orbán’s favored entities has also been going on for a while. Orbán made them pay part of their taxes into sport clubs. Since 2011, the Hungarian government allowed companies to divert some of their taxes – and spend it on certain kinds of spectator sports instead (mostly football, of course). By 2017, EUR 1.5 billion has gone into sports this way. This is what they call “private financing” of football. (And it doesn’t include public money poured into stadiums, budgetary funds, the exorbitant (and ever-ballooning) costs of the water sports world championship and other sport events and the application to host the Olympics that is now put on ice but can reemerge any time if Orbán feels the force is with him.
The question emerges whether Orbán is preparing to lose in 2022. But the truth is, Hungary is now ungovernable – unless by Orbán. He elevated so many issues into the 2/3 supermajority realm (his favorites into the constitution) that not even a 50%+1 majority can govern.