Hungary will allow companies to pay their taxes in euros or dollars – finance minister

Hungarian Finance Minister Mihaly Varga speaks during a business conference in Budapest, Hungary February 19, 2022. REUTERS/Bernadett Szabo

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BUDAPEST, July 30 (Reuters) – Hungary will allow businesses to pay taxes in euros or dollars as well as in forints, the government announced on Saturday, a move that analysts said could boost the country’s foreign currency reserves. country.

Like other central European countries such as Poland, the Czech Republic or Romania, Hungary is a long way from adopting the euro, with Prime Minister Viktor Orban’s government ruling it out for the foreseeable future, claiming that this would amount to a loss of sovereignty in matters of economic policy.

Hungary’s move is similar to a plan announced by the Czech government last month that plans to let companies pay taxes in euros from 2024, allowing the state to increase its borrowing in euros.

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“For businesses that derive revenue partially or entirely in a foreign currency, the new rule could simplify processes,” Hungarian Finance Minister Mihaly Varga wrote on Facebook on Saturday, adding that the option was available to all businesses.

He said the change would simplify business accounting while ensuring that taxes would continue to flow to the state and the budget would remain balanced.

No other details were immediately available. A government press conference was scheduled for 09:00 GMT.

The forint, Central Europe’s worst performing currency so far this year, hit a record high of 416.90 to the euro earlier this month, under pressure from a lack of agreement with the Union European Union on recovery funds, galloping inflation and a double deficit.

“Companies could save on conversion fees…and the government is probably aiming to increase foreign exchange reserves,” said David Nemeth, principal analyst at K&H Bank.

“Even if there is an agreement with Brussels in the fall, there will not be a significant amount of European funds that will arrive by the end of the year, and it is an easy way to obtain foreign currency without issuing fx bonds.”

A spike in gasoline prices has also put pressure on the forint recently as it could worsen Hungary’s trade balance, traders and analysts said.

Hungary, a small export-oriented economy, is home to manufacturing plants of major German automakers, including Audi (AUDVF.PK) and Daimler.

The government could also use taxes paid in euros or dollars to refinance bonds denominated in foreign currencies, Nemeth said.

“If more and more market participants are able to use only euros, then the importance of the forint will be diminished… It also means getting closer to the eurozone without adopting the euro.”

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Reporting by Anita Komuves and Krisztina Than; Editing by Toby Chopra

Our standards: The Thomson Reuters Trust Principles.

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