Solidarity Contribution: Local Governments Face Increased Financial Burden in Hungary
The Hungarian government is set to impose a solidarity contribution of 360 billion HUF on municipalities in 2025, sparking controversy among local leaders.
The Hungarian government has announced plans to collect 360 billion HUF from local municipalities as a solidarity contribution in 2025, a move intended to promote shared financial responsibility and address regional inequalities.
However, this action has faced significant opposition from various municipal leaders, including Budapest's mayor Gergely Karácsony and Tamás Wittinghoff, the mayor of Budaörs.
The Budapest city government has also secured a legal victory against the Ministry of Finance regarding the scale of this contribution.
In a decree published on February 11, 2025, the government has mandated that Budapest will be required to pay an increased solidarity contribution of 89 billion HUF, along with an additional 74 billion HUF being deducted from the city's districts this year.
This translates to approximately 100,000 HUF per resident in Budapest.
Contrarily, the highest per capita contributions are being levied on regions with substantial local tax revenues, such as Gyöngyösmellék and Berente.
Due to significant local revenues, these municipalities contribute only 20% of their income derived from local taxes as solidarity contributions.
A detailed map indicates the per capita amount of the solidarity contributions across various municipalities.
The total solidarity contributions are influenced not solely by the local population size but also by the presence of large industrial enterprises.
In Berente's case, the municipality benefits from significant industrial tax revenues from BorsodChem, the largest company in the region.
The data comparison utilizes the latest available municipal-level statistics from 2023, as figures for 2024 are not yet public.
This may lead to cases where certain municipalities show contribution ratios exceeding 100%, likely due to increases in their local tax revenues.
According to the 2024 XC Law, only municipalities with a per capita industrial tax (HIPA) capacity exceeding 25,000 HUF are subject to the solidarity contribution.
The assessment is based on the preceding year's HIPA revenue.
As such, 46 municipalities that recorded HIPA rates below 25,000 HUF per resident are nonetheless required to contribute, and 21 municipalities without any HIPA revenue in 2023 are included among those mandated to pay.
Interestingly, some less populated municipalities with HIPA revenues exceeding 50,000 HUF per resident have managed to avoid this contribution.
For example, Bürüs, Kercaszomor, and Csér have extremely low populations but high per capita industrial tax revenues.
In contrast, Rácalmás, which has a population of approximately 5,000 and an HIPA revenue per capita of 100,000 HUF, is not included in the contributing municipalities.
On average, the capital's districts recorded around 130,000 HUF in HIPA revenue, excluding District V, where revenues exceeded 11 million HUF.
Despite this, the solidarity contribution for this district remains among the lowest in Budapest.
A retrospective of municipal funding over the past six years reveals a rise from 763 billion HUF in 2020 to an anticipated 990 billion HUF by 2025. However, inflation has eroded this increase, leading to a real decrease in support.
The imposed solidarity tax has surged sixfold, climbing from 58 billion HUF in 2020 to an expected 360 billion HUF in 2025, resulting in the proportion of municipal contributions rising from 8% to 36% during this timeframe.
The relation between the amount of solidarity contributions and whether a municipality is governed by opposition parties has also sparked discussion, though statistical patterns suggest that municipalities aligned with the ruling party do not face disproportionately lighter contributions.
The extent to which these contributions will be reallocated among municipalities remains a subject of speculation.
However, this action has faced significant opposition from various municipal leaders, including Budapest's mayor Gergely Karácsony and Tamás Wittinghoff, the mayor of Budaörs.
The Budapest city government has also secured a legal victory against the Ministry of Finance regarding the scale of this contribution.
In a decree published on February 11, 2025, the government has mandated that Budapest will be required to pay an increased solidarity contribution of 89 billion HUF, along with an additional 74 billion HUF being deducted from the city's districts this year.
This translates to approximately 100,000 HUF per resident in Budapest.
Contrarily, the highest per capita contributions are being levied on regions with substantial local tax revenues, such as Gyöngyösmellék and Berente.
Due to significant local revenues, these municipalities contribute only 20% of their income derived from local taxes as solidarity contributions.
A detailed map indicates the per capita amount of the solidarity contributions across various municipalities.
The total solidarity contributions are influenced not solely by the local population size but also by the presence of large industrial enterprises.
In Berente's case, the municipality benefits from significant industrial tax revenues from BorsodChem, the largest company in the region.
The data comparison utilizes the latest available municipal-level statistics from 2023, as figures for 2024 are not yet public.
This may lead to cases where certain municipalities show contribution ratios exceeding 100%, likely due to increases in their local tax revenues.
According to the 2024 XC Law, only municipalities with a per capita industrial tax (HIPA) capacity exceeding 25,000 HUF are subject to the solidarity contribution.
The assessment is based on the preceding year's HIPA revenue.
As such, 46 municipalities that recorded HIPA rates below 25,000 HUF per resident are nonetheless required to contribute, and 21 municipalities without any HIPA revenue in 2023 are included among those mandated to pay.
Interestingly, some less populated municipalities with HIPA revenues exceeding 50,000 HUF per resident have managed to avoid this contribution.
For example, Bürüs, Kercaszomor, and Csér have extremely low populations but high per capita industrial tax revenues.
In contrast, Rácalmás, which has a population of approximately 5,000 and an HIPA revenue per capita of 100,000 HUF, is not included in the contributing municipalities.
On average, the capital's districts recorded around 130,000 HUF in HIPA revenue, excluding District V, where revenues exceeded 11 million HUF.
Despite this, the solidarity contribution for this district remains among the lowest in Budapest.
A retrospective of municipal funding over the past six years reveals a rise from 763 billion HUF in 2020 to an anticipated 990 billion HUF by 2025. However, inflation has eroded this increase, leading to a real decrease in support.
The imposed solidarity tax has surged sixfold, climbing from 58 billion HUF in 2020 to an expected 360 billion HUF in 2025, resulting in the proportion of municipal contributions rising from 8% to 36% during this timeframe.
The relation between the amount of solidarity contributions and whether a municipality is governed by opposition parties has also sparked discussion, though statistical patterns suggest that municipalities aligned with the ruling party do not face disproportionately lighter contributions.
The extent to which these contributions will be reallocated among municipalities remains a subject of speculation.
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