Hungary has introduced a tax on retail turnover as part of its economic plan to bailout the nation’s economy in the face of the current pandemic. The tax is effective as of May 1, 2020.
According to a notice on the Hungarian parliament’s website, the tax is expected to raise $110 million this year to help the economy recovery. It is expected to raise even more money in the following years, presumably as retail sales grow.
Will other nations introduce similar taxes to help them cope with the high costs of supporting both businesses and consumers?
“Hungary’s retail tax is regarded as unusual and not without problems. It has been reviewed and not blocked by the European Commission, which has some tax oversight powers,” said Richard Asquith, VP Global Indirect Tax at Alavara Europe Ltd., a tax advisory consultancy.
“I do not expect to see any countries following the model. Perhaps one or two at most. But there will be a general increase in the tax rates and base to meet the costs of the COVID-19 crisis. This will mean increases in VAT rates. As well as more taxing around the world on foreign e-commerce companies,” he told Inside Fashion.
There will be similar taxes like this on digital services to consumers. In particular, extra taxes on streaming media/TV companies, according to Mr. Asquith.
Who Will Be Impacted: The tax will include both high street and e-commerce retail, as well as cross border sales to local consumers.
Tax Rates (based on annual sales)
0% for sales below $1.5 million
0.1% sales between $1.5 – $93 million
0.4% sales between $93 – $310 million
2.5% sales above $310 million
The sales calculation is based on rolling sales total for the previous 12 months. Reporting is on a monthly basis. (Alavara)
