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Hungary Imposes Windfall Tax On Energy Companies

A day after declaring a state of emergency, Hungarian leader Viktor Orban said on Wednesday that big companies operating in the country, including energy companies, would be forced to turn over “extra profits” to the state to fund subsidies. 

Banks, retailers, airlines, energy companies and all other large corporations in Hungary will be obliged to pay a “large part of their extra profits” to the state this year and next, Orban said in an announcement made on Facebook

The “windfall taxes” would be placed into state funds to help subsidize soaring food and energy prices and consumer energy bills, as well as to prop up Hungarian defenses amid Russia’s war on Ukraine. 

More details are expected on Thursday. 

Orban’s announcement comes a day after a declaration of emergency on Tuesday, the same day that the new Hungarian government assumed office. 

Hungary’s Fidesz ruling party, in control of parliament, amended the country’s constitution Tuesday, paving the way for the prime minister to declare a state of emergency, citing a war that puts Hungarian security at risk, from physical and financial, to energy. 

The Hungarian PM has blamed both the war and EU sanctions for “huge upheaval and a drastic rise in prices”, EURACTIV reported

Orban, who strongly opposes a proposed EU ban on Russian oil, won a fourth consecutive term in office in April elections, and the constitutional amendment allowing for a state of emergency gives him the power to approve measures by decree. 

Investor confidence is expected to take a hit, much like it did in 2010 when Orban made a similar move against big companies, imposing a windfall tax to make up for budget shortcomings. 

On Wednesday, European Council President Charles Michel said he was optimistic that a deal on a Russian oil embargo  could be reached ahead of a summit in Brussels scheduled for Monday. However, European Commission president Ursula von der Leyen has warned against “false expectations”.

By Charles Kennedy for Oilprice.com

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Comments

  • Mamdouh Salameh - 25th May 2022 at 2:16pm:
    As long as the windfall tax is used to help subsidize soaring food and energy prices and consumer energy bills, then it is justified. Moreover, it should be reviewed once the circumstances that provoked it have stabilized otherwise it could affect investors’ confidence.

    This also signifies how far Hungarian Prime Minister Viktor Orban will go in his opposition to an EU ban on Russian oil imports. He even asked the President of the European Council, Charles Michel, to remove the topic of the ban from the agenda of the EU summit on May 30 and 31 as reported Reuters.

    His Foreign Minister went even a step further warning that if the ban is on the agenda next week, it would run the serious danger of dismantling European unity.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
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