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Protests against self-employed tax reform

July 14th, 2022

On Tuesday, several hundred demonstrators blocked traffic in Budapest in protest against the government’s amendments to the popular simplified tax scheme (KATA), designed for self-employed entrepreneurs.

The amendment to the KATA self-employed tax scheme was tabled in Parliament on Monday and approved on Tuesday, without debate with stakeholders. The law will restrict participation in the preferential tax scheme, from 1 September, to those self-employed who provide services only to individuals. A wide range of self-employed people, from bike couriers to journalists to professional musicians will be affected. The government said the adjustments were necessary as the scheme is widely abused by employers to replace de facto employment contracts, in order to avoid higher taxes. Protesters demanding the withdrawal of the amendments blocked traffic on two bridges over the Danube in Budapest on Tuesday afternoon.

On Telex, Gergely Brückner writes that most of the current 450,000 self-employed who pay tax in the KATA scheme will be excluded from the preferential self-employment tax arrangement. As participants in the KATA scheme can provide services only for individuals, those who have income from companies will need to opt out and pay higher taxes, the liberal pundit points out. Brückner predicts that the new rules will result in tax evasion and job losses.

Magyar Nemzet’s Tamás Pilhál lambasts opposition parties for siding with demonstrators blocking traffic in Budapest. The pro-government commentator finds the tax amendments justified, claiming that the preferential tax scheme designed for self-employed individual contractors was used by employers including multinational companies to avoid higher taxes. In an aside, Pilhál recalls that the opposition parties did not even support the introduction of the KATA scheme in 2013. He concludes by accusing the opposition of trying to increase its popularity by creating public hysteria after their humiliating defeat in the April Parliamentary election.