Budapest faces an escalating financial crisis as the government introduces a legislative amendment aimed at altering the local business tax regulations, which is projected to drastically reduce the city's revenue.

Mayor Gergely Karácsony has publicly warned that the proposed changes could cripple the capital's ability to sustain essential public services amid looming bankruptcy.

The Hungarian Treasury's recent seizure of 10.2 billion forints from the city’s accounts was a precursor to the government's latest maneuver, which seeks to divert significant funds away from Budapest.

Local authorities are particularly concerned about the ramifications of the new tax policy, which would notably benefit casinos and the state-owned Szerencsejáték Zrt., allowing them to pay only a fraction of the current local business tax.

Last year, Szerencsejáték Zrt.

contributed 24.5 billion forints to Budapest’s budget.

The proposed changes could reduce the city's business tax revenue by approximately 15 billion forints, exacerbating its existing financial woes.

As of August, the city's financial outlook appears grim, with forecasts estimating a shortfall of 117 billion forints, primarily due to planned state seizures and unadjusted financial commitments.

Karácsony emphasized that without immediate legal protection, the capital may find itself unable to provide even the most basic services such as public transport, water supply, and social care facilities.

The business tax scheme reform has been justified by government officials as necessary for aligning tax practices with international standards, claiming that current tax regulations disproportionately burden the gaming sector.

However, critics, including city officials, argue that this move is designed to enrich government allies and diminish Budapest's financial autonomy.

Amid mounting tensions, a council meeting escalated into a heated debate, where representatives from multiple parties called for a more aggressive stance against the government's actions.

Karácsony highlighted the urgency of the situation, indicating that city's operational funding is critically low and that protests, including a symbolic ten-minute transport shutdown, are being organized to emphasize the severity of the crisis.

The unrest is further complicated by allegations that the city has mismanaged its finances, with some government officials suggesting that previous local leadership, under Karácsony, failed to plan adequately for the fiscal responsibilities, including a solidarity contribution that has escalated from 50 billion forints to potentially overwhelming figures with recent policy changes.

In light of the escalating financial pressure, calls for negotiation with the government have increased.

City officials noted the necessity of dialogue to resolve the impending financial crisis, stressing that the funding gaps created by recent tax reforms and government policies require urgent attention.

While the government has acknowledged the unsustainable nature of Budapest's current financial status, its spokesperson contended that the city must assume greater responsibility for its fiscal management.

As discussions continue, the capital’s leadership faces the dual challenge of addressing immediate liquidity concerns while navigating the complexities of legislative adjustments that threaten to undermine its financial stability.