A group of inspectors from the National Tax and Customs Office (NAV) recently performed a "sting" operation in which they posed as members of bachelorette party. The inspectors ordered a sight-seeing trip in a limousine in Békés County, and arrived with bottles of champagne and wearing veils.

The government of Esztergom is suing carmaker Magyar Suzuki Zrt. for Ft 940 million (€3.2 million) over a failed land purchase, according to local portal Szeretgom. The town's independent mayor, Éva Tétényi, told Index she disagreed with the decision made at a closed session of the local assembly, where governing party Fidesz is in majority. She did not want to confirm or deny other information published by Szeretgom. The portal said Magyar Suzuki Zrt. had undertaken to purchase land in the industrial park if the town used a considerable part of the price to build a roundabout for the plant. A preliminary contract was signed in January 2008, but the carmaker later withdrew from signing the deal. The company's lawyers said they could provide sufficient reason for this step if the case was brought to court: The company's finances deteriorated following the date of signing the contract. If the company was forced to buy the land, it could lead to the layoff of 500 employees, the company said.

Budapest's Bank Center, the landmark class A office complex located at Szabadság tér 7 in District V, recently signed contracts with several new tenants over the summer, including Franklin Templeton Investments, venture capital company Enterprise Investors and consultancy firms Falkenburg Corporate Finance and Finalyse Budapest. Negotiations are underway with several other companies, and the transactions are expected to be finalized by the end of September. In addition to new tenants, contracts with three renters were extended over the first six months of the year, and talks are underway with others. Currently, 85% of the building is occupied, said Anett Éles, head of rental. [resourceinfo.hu]

The forint weakened to Ft 291.7 per euro yesterday, its lowest level so far this year, prompting some analysts to suggest that the central bank might raise interest rates in the near future. Having weakened to beyond Ft 290, the exchange rate could easily reach Ft 300 per euro, Napi Gazdaság adds. "As the forint is at a 14-month low against the euro, it is more likely now that any change in the base rate in the next three months will be a hike rather than a cut," said London-based analyst Neil Shearing of Capital Economics. There is a 50% chance that the central bank's monetary council will raise the base rate from 6.0% to 6.5% at its meeting today, as a preventive measure, Shearing added. Societe Generale analysts go further, arguing that the market is underestimating the risks associated with Hungary and that a rate hike of two or three percentage points may be necessary if the exchange rate reaches Ft 300 per euro. After visiting Hungary last week, Societe Generale analysts expressed concerns about the worsening global investment environment and the effects of foreign-currency mortgage repayments at below market rates. Currency trader Pál Saághy of Equilor brokers said "further forint weakening is entirely plausible, as that is supported by the global and the unique domestic environment".

Hungary's parliament on Monday evening gave the green light to the ruling Fidesz party's scheme to offer holders of foreign currency-denominated mortgages the option to pay off their loans at preferential rates. The bill, submitted by Fidesz MP Antal Rogan, was passed into law with 277 votes for, 9 against, while 30 deputies abstained from voting. The motion was supported by deputies of Fidesz and of radical nationalist Jobbik. The green opposition LMP voted against and the Socialists abstained. Under the new law, troubled borrowers can make a full repayment at 180 forints to the Swiss franc, 250 forints to the euro and 2 forints to the Japanese yen, unless the rate of the forint was not higher at the time of taking out the loan. The law also gives borrowers the deadline of December 30 this year to indicate their participation in the programme.

From now on Hungary's Central Credit Information System will also contain the names of private individuals who repay their loans in due course. The related motion, submitted to parliament by Fidesz lawmaker Antal Rogan, was approved with 286 votes for and 29 against on Monday evening. From now on, the system will also contain the positive data of all private loan agreements. The system will continue to keep a record of all private individuals who raised loans but failed to repay them on time. The system will continue to contain the credit history of all businesses.

Hungary's forint slipped over a percent on Monday morning to 290 per euro, while it weakened to around 240 to the Swiss franc, currency traders told MTI. The last time the forint recorded lows against the euro of around 290 was in July 2010. The Hungarian unit traded at 285.77 to the euro and 236.56 to the franc late Friday.

Tax returns shows that some 1.2 million Hungarians are registered by their employer on the minimum wage. Many do work on the side, thereby dodging their tax commitments, the former deputy head of the tax office told daily Magyar Nemzet on Monday. Szabolcs Vamos-Nagy told the paper that the minimum-wage figure was unrealistic. Based on the tax-return data, he estimated that around half a million people work entirely in the shadow economy. The paper said that tax evasion - a common trick is to declare as a minimum wage-earner and do work on the side or else work under the radar of the tax authority - is rife in Hungary. It quoted an official of the Central Statistical Office estimating that the hidden economy was worth some 4,600 billion forints (EUR 16.3 bn). Peter Szabo said that the black economy had grown to represent about 17-18 percent of gross domestic product last year, from 15 percent in 2002.

Few Hungarians have opted to repay their foreign currency-denominated mortgages at a fixed rate under a government assistance programme launched a month ago, business daily Vilaggazdasag said on Monday. Vilaggazdasag asked eight big banks how many borrowers had joined the programme. The number added up to less than 2,300. The assistance programme, launched on August 19, fixes the exchange rate for repayments on the loans and puts the difference between the fixed rate and the market rate on a separate forint account to be repaid later. The programme's rate for Swiss franc-based loans - once the most popular lending product in Hungary - is 180 forints to the franc, well under the market rate of around 239 early Monday.

Hungary's government will put an end to the "era of bankers" and protect people from having to bear all losses and risks, Prime Minister Viktor Orban said in a Monday interview with free-sheet daily Metropol on Monday. Orban said the governments of Romania and Poland had successfully protected people from bankers but Hungary's past leaders had taken the side of the banks. Orban noted recent announcements to ban forced evictions and enable the full repayment of mortgages denominated in foreign currency at a market discount. He said that while the affected banks had initially condemned the government's announcement, they were likely to reconsider their position. He added that similar measures were expected to be introduced in several European countries. The prime minister said the government was determined to help people who had put their homes up as collateral as well as householders threatened by forced eviction. Orban said that it was not expected that the Swiss franc's exchange-rate would drop to the past level of stability against the forint so it was worth repaying mortgage at the fixed rate in a lump sum, even this meant taking out a forint loan for this purpose. He said, however, that the government would not force banks to offer forint loans since doing so would boost fears about the stability of the country's banking system. Nevertheless, banks will in all likelihood offer forint loans if there is a demand, he added. He said Hungary's complicated progressive tax system in the past had worked against labour, families and enterprises. This is why the government had decided to phase out super-grossing - adding social contributions to the tax base - and develop a labour-based economy, he added. "Hungary must become a production centre for Europe," which can materialise if people feel that it is worth working and the current tax systems encourages this, he said. Orban said the flat-rate tax system would form part of a new stability act, a so-called cardinal law requiring a two-thirds majority - to be submitted in the near future. The stability act will also include rules for preventing any new build-up of the public debt, he added. The prime minister said the number of people involved in public-works schemes would rise to between 200,000 and 300,000 by the end of 2012. Orban said next year's tasks also included setting straight the health insurance fund in order to ensure that revenues cover expenses.

Hungary's newly introduced chips tax fits in a world trend and has attracted followers abroad, the state secretary in charge of health affairs at the Ministry of National Resources told MTI late on Monday. Miklos Szocska said that Secretary-General of the United Nations Ban Ki-moon and other speakers at the UN general assembly focusing on the global fight against the spread of non-communicable diseases said that companies must also bear responsibility for the public health effects of their products. The Hungarian government's initiative to levy a tax on food and drinks with high sugar, salt, carbohydrate and caffeine content has attracted followers in France, Spain and other European countries, Szocska said. Some of the speakers even suggested that certain product groups should be banned, he added. "We were surprised and at the same time pleased to hear that the steps we had taken were acknowledged in the world," Szocska said after attending the UN general assembly meeting in the company of Hungarian President Pal Schmitt. Commenting on the international role of Hungarian health care, Szocska said many doctors who currently occupy leading positions around the world had received their training in Hungary and this is an opportunity that should be utilised. There are currently more international students than local students training medicine in Hungary and talks were held about further training possibilities during the UN meeting, he added.

Hungary's parliament passed a bill under which companies can submit VAT refund claims based on an European Court of Justice ruling before October 20, or obtain a refund later in their VAT returns, late on Monday. The new law repeals earlier stipulations which prevented companies from reclaiming VAT collected on unpaid transactions. The European court ruled late in July that Hungary's VAT regulations were incompatible with EU law, and the state must refund payments amounting to 250 billion forints (EUR 860m). The motion, tendered by Economy Minister Gyorgy Matolcsy, was adopted with a unanimous support of 301 deputies. The tax authority will refund the amounts within 30 days of receiving a reclaim, or within 45 days if the amount exceeds one million forints.

A new set of measures aimed at improving Hungary's budget balance - announced by Economy Minister György Matolcsy on September 16 - are similar in structure and methods to the "New Balance Program" created by the second government of Ferenc Gyurcsány in 2006, Origo writes. As a consequence of those measures, the economy slowed down drastically, consumption plunged, and inflation accelerated. Similarly to Matolcsy's program, the 2006 package was built on raising the VAT, social contributions and several smaller taxes while also introducing new ones. Cuts to spending were largely limited to a scheme to subsidize household consumption of national gas. The newly-announced measures are clearly benefiting the rich, news portal Index writes. According to an analysis by RSM DTM Hungary, the "hole" in next year's budget will be filled by low-earners and families raising more than two children. Workers who have only two children and earn over Ft 213,000 (€739.5) gross per month will take home a little more next year. Single workers who earn the minimum wage will be the most negatively affected by the changes in the personal income tax system. Such individuals would lose one-sixth of their net income if their wage remained unchanged, Origo writes. Raising the VAT would also mean their income would go less far.

It's not just in Budapest that seemingly exciting plans for urban renewal never go anywhere. But the case of a series of well-publicized plans for the reconstruction of the Buda Castle may take the cake. According to index.hu, the plans - dubbed "Center of the Country Project" - turn out to have been created by university students for a media art assignment.

Hungary's government calculates with economic growth of 1.5 percent and a budget deficit target of 2.5 percent of GDP in its preparations for the 2012 budget, the economy minister said on Friday. The government expects to improve the budget balance by 750 billion forints (EUR 2.6bn) next year and put aside 300 billion forints as a buffer, Gyorgy Matolcsy said. Half of that amount is to be paid into the National Protection Fund, he said. The government plans to raise value added tax (VAT) from 25 to 27 percent and raise employee health-care contributions by 1.5 percentage points. It expects budget revenue to rise by 445 billion forints in 2012. Next year, the government plans to phase out super-grossing - adding social contributions to the tax base - and scrap tax credits, gradually bringing the flat-rate income tax rate down to 16 percent. Insurance companies will be required to pay a sectoral tax from 2012 and the tax on company cars will be raised by 40 percent depending on their environmental class. Inflation is forecast at 4.2 percent for the year as part of the 2012 budget calculations, he said. Hungarian analysts gave mixed reactions to the budget plans outlined by Matolcsy. Zsolt Kondrat of MKB Bank welcomed that the government had opted for lower-risk measures to cut the deficit. "The macroeconomic course seems realistic," he said. Concerning the planned VAT rise, he said the cabinet would make a good choice if it raised consumption taxes rather than income taxes. "The solutions chosen by the government will bring back the hope that no matter how tough next year will be, the targets set for it can be met," he said. Gyorgy Barcza of K and H Bank was disappointed to see the plan "traditionally" focus on tax hikes rather than spending cuts. He expressed doubt whether the planned VAT rise would be compatible with the EU directives. Zoltan Torok of Raiffeisen Bank welcomed that the government had realised that it must calculate with a lower growth rate. Although the VAT and social contribution rises have some negative effects, they are easy to collect, he said. Torok expects an economic decline rather than growth next year. The main opposition Socialist party said next year's budget presaged rising prices and poverty. Istvan Jozsa, a senior Socialist economic spokesman, said the VAT rise would hit the poor and would be Europe's highest sales tax. He added the fact that the government now calculated with growth of just 1.5 percent, as opposed to its earlier projection of 3 percent, meant that it no longer believed in the success of its pro-growth economic policy. A lawmaker of green party LMP said that Matolcsy had announced the biggest austerity package for the last 20 years. Gabor Vago said, "it looks like Matolcsy has entirely gone round the bend" when he said that there was no need for austerity. He said that the minister had been "plugging the hole made by the flat tax for the past year" by raising other taxes on a monthly basis as well as other austerity measures. Vago added that the VAT rise would drag down growth. The deputy group leader of radical nationalist Jobbik said Matolcsy's "new austerity package" pressed further down the "neo-liberal" path. Tamas Hegedus said the flat tax favoured the rich and the cost of the forced pace of reducing the public debt was being paid for by the poor and middle classes.

Hungary's government will "leave nobody on the side of the road", it will protect borrowers with home loans from the crisis in the eurozone, Prime Minister Viktor Orban said in a video message posted on his Facebook page. The Prime Minister said the country is in a very important period, during which "it is more important than at any other time that we stand up for each other, that we stand together for Hungary." The first "wave of the euro crisis" has reached Hungary, and there will be more, because the waves the crisis sends again and again do not stop at the country's borders, he added. Orban said "hundreds of thousands, or about a million" Hungarians with foreign currency-denominated mortgages were in danger of loosing the roof over their heads. He stressed the importance to Hungarians of having their own home, of making a secure nest for their family, and said they were ready to work more for this. "Owning one's own home and a free life: these can only be had together. That is why we have to offer assistance to borrowers with foreign currency-denominated loans," Orban said. He added that more and more measures would be taken to put everybody on their feet and keep them there, so nobody looses the roof over their head and the heads of their family. Orban said "gripping, hard times are ahead of us" and that the autumn session of parliament would have "exciting and important debates and decisions". The Prime Minister asked Hungarians for their support to successfully carry out these debates so Hungary could go through a period of renewal this autumn and not come out of the crisis weaker, but stronger. Fidesz MP Antal Rogan on Friday submitted to Parliament a bill that would give Hungarian borrowers the option to repay early their foreign currency-denominated mortgages at a fixed exchange rate discounted from the market rate.

Hungary's government has a "plan B" and a "plan C" if an international court prohibits a plan allowing early repayment of foreign currency-denominated mortgages at a fixed rate that is lower than the market rate, Prime Minister Viktor Orban said in an interview published in Saturday's issue of tabloid Blikk. "If one takes a risky political decision, then there has to be a second and third line of defence, too. We have the solution in the drawer that we can take out if an international court prohibits our latest decision," Orban said. The prime minister announced the early repayment scheme on Monday and Fidesz MP Antal Rogan submitted the bill implementing the plan to Parliament late Friday. Orban said in an interview on Tuesday that he expected the plan to "come under attack" and conceded that the European Court could take a decision years from now saying the plan is illegal. The Hungarian state, not borrowers, will bear the burden of any such decision, he added. Orban told Blikk the government would continue the struggle against the banks "until we win". The prime minister revealed he repaid early his own five million forint Swiss franc-based loan two months earlier.

Hungary's government has a "plan B" and a "plan C" if an international court prohibits a plan allowing early repayment of foreign currency-denominated mortgages at a fixed rate that is lower than the market rate, Prime Minister Viktor Orban said in an interview published in Saturday's issue of tabloid Blikk. "If one takes a risky political decision, then there has to be a second and third line of defence, too. We have the solution in the drawer that we can take out if an international court prohibits our latest decision," Orban said. The prime minister announced the early repayment scheme on Monday and Fidesz MP Antal Rogan submitted the bill implementing the plan to Parliament late Friday. Orban said in an interview on Tuesday that he expected the plan to "come under attack" and conceded that the European Court could take a decision years from now saying the plan is illegal. The Hungarian state, not borrowers, will bear the burden of any such decision, he added. Orban told Blikk the government would continue the struggle against the banks "until we win". The prime minister revealed he repaid early his own five million forint Swiss franc-based loan two months earlier.

Gross average wages in Hungary rose by an annual 6.2 percent in July, accelerating from 4.7 percent in June, the Central Statistical Office (KSH) said on Friday. Gross wages rose in the private sector by an annual 3.4 percent and in the public sector by 12.9 percent in July. In that month net average wages increased by an annual 6.8 percent, compared to a 5.9 percent increase in June. Real wages rose by 3.6 percent, calculating with July consumer price inflation of 3.1 percent. Gross regular wages, which exclude bonuses and one-off payments, rose by 5.4 percent in July, at a slightly slower rate than the 5.5 percent increase in June. The gross average wage in the private sector rose by 4.1 percent to 200,121 forints (EUR 700) per month. In the public sector gross average wages were up 8.1 percent at 197,532 forints. Analysts polled by MTI said the gross wage rises in July exceeded expectations, and were probably triggered by bonuses and premiums. David Nemeth, an analyst of ING Bank, said the growth in gross wages was pulled up by bonuses and premiums paid. Shredding this effect, the wage growth in the private sector would have come to about an annual 3-5 percent. The growth, however, will not generate an inflationary pressure, as companies envisage an inflation rate of 3-4 percent this year, and are adjusting wages accordingly, Nemeth said. He added that a steady rise in net real wages is good news for the economy, as this could bring along a rise in demand. Gergely Suppan, an analyst of Takarekbank, agreed that the wage rise exceeded expectations and predicted a 4.5 percent rise for the rest of the year, which, with slowing inflation, could lead to a further rise in real wages. However, he was cautious to predict a rise in demand, as households are still weighed down by foreign currency debt, he said.

Executives in Hungary receive a gross salary 6.2 times higher than that of administrative workers, on average, according to a report by the Hay Group. The results are based on data on 270,000 employees from 440 multinational companies. By comparison, the differential is 2.7 in Germany, 3.2 in the UK, 3.7 in the US, 5.4 in Slovakia, and 5.9 in the Czech Republic. Among those with wider disparities, the difference is 7.6 in Russia, 8.5 in Poland, 9.1 in Romania and 11.4 in the Ukraine. The net wages of low-income persons in Hungary are down 0.8% from last year, while those of executives have gained 37%.