Environmentally harmful measures in Hungary

Zoltán Szabó

Clean Air Action Group, Hungary

Transport – road construction programmes

• In 2004 the government plans to spend 260 billion HUF (1 billion Euro) on the construction of new motorways.

• In Hungary heavy trucks cause about 300 billion HUF of unpaid damage yearly (damage to roads, buildings, utilities; environmental pollution, health effects, accidents).

Existing and Planned Motorways in Hungary

Yellow – places which can be reached in less than 15 minutes from the motorway

Orange – places which can be reached in less than 30 minutes from the motorway

19881988

 

 

20032003

20062006

 

 

20152015

Road surface strengthening program, regional airports

• Aim: to raise the axle-load standard bearing capacity of main roads from 10 to 11.5 tons as required by the EU– Road strengthening is needed by less than 0.1% of the road users

– by the heaviest trucks and buses– Cost: 1200 million Euros – Hungarian and EU taxpayers’ money

(first phase approved by ISPA) • Plan to develop 13 regional airports mainly by taxpayers’

money• Railways are continuing to deteriorate

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Consumer price index

Price of unleaded petrol 95

The consumer price index andthe price of unleaded petrol in Hungary

1991=100

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Taxes unpaid by foreign trucks

Total unpaid taxes for the years

1992-2001: 2,8 billion Euros

Budget cut for public transport

• Government plans:– to shift reduced VAT rate of public transport to normal rate– decrease the state support to students and pensioners

• Insufficient public investment in railway infrastructure• Budapest Public Transport Company needs to be

financially consolidated each year

A petition was handed over to State Secretary: concern about the reduction of state support for railways and public transport

Company car taxation

• Use of company cars for personal purposes to evade paying personal income tax and social security tax:loss of state revenue: more than 600 billion HUF/year

(2,3 billion Euro)Compare this with the 11 billion HUF revenue in 2004

from the newly introduced energy tax!• 75-95% of executives has got a company car, accompanied

mostly with ‘unlimited petrol bills’• Regressive rate in company car taxation

Good news: 100% increase in tax rate from 2004

Aviation – Malév’s bilateral agreement with East-European

countries• Hungary’ derogation of noise standards• Malev’s bilateral agreement with East-European

countries (Russia, Ukrain, Moldova, etc.)• Noisy aircrafts can land in Hungary regardless of their

noise emission• Citizens living around Ferihegy airport bear the external

costs of noise• Malev’s passengers to East-Europe have increased by

22% in Jan-Aug 2003

Government programme for truck fleet change

• Road hauliers can apply to the Ministry of Economy and Transport for subsidy of purchase of trucks

• The programme is open for SMEs

• Its aim is the reduction of the burden on the environment caused by road haulage

• ‘Environmentally friendly’ trucks

• Budget of 2 billion HUF (almost 10 million Euro)

Reduced VAT rate for pesticides and fertilisers

• There is a lower (12 per cent) VAT rate to artificial fertilizers, insecticides and herbicides

• Producing artificial fertilizers is an extremely energy-intensive process

• Application of increasing quantities of nitrogen fertilizers– from 263 thousand tons in 1999 it went up to 275 thousand tons

in 2001– while the amount of manure used diminished from 3920 thousand

tons to 2869 thousand tons in the same period

Our proposal: Raising to 25 per cent the VAT rate applicable to artificial fertilizers and some other products

Taxes in OECD Member countries levied

on Non-point sources of water pollution

country type Tax rate

Belgium pesticides 0,248€ € per gram active substance

Denmark Insecticides, Chemical products for disinfection of soil, Herbicides, Fungicides, Chemical products for reduction of plant growth

25-35% of retail value including excise duty but excluding VAT

Finland Pesticides 840€ for market entrance + 35% of price (excl. VAT)

Norway Pesticides 0,186€/daa

Sweden Pesticides 0,216€ per whole kg active constituent

France General tax on polluting activities 380-1670€ per tonne

Source: OECD/EU Database on Environmentally Related Taxes, 2001

Pesticides

Taxes in OECD Member countries levied on Non-point sources of water

pollution:

country type Tax rate

Denmark Nitrogen used by households 0.6712€ per kg

Sweden Artificial fertilisers -- nitrogen part 0.1945€ per kg Nitrogen

Sweden Artificial fertilisers -- cadmium part 3.2414€ per g Cadmium

Source: OECD/EU Database on Environmentally Related Taxes, 2001

Artificial fertilisers

Housing policy

• Reduced rate loans for purchase of new houses - higher for existing ones

• New houses are built mostly in green areas• Tax rebates for new houses

Proposals for an environment-saving housing policy in Hungary, which helps citizens feel secure and lead a normal life– At least 50 per cent of the subsidies to the renovation of existing

buildings and the revitalization of public areas– At least 70 per cent, construction of new flats on brown fields– Homeowners be encouraged by tax allowances (VAT and personal

income tax) to spend on the renovation of existing buildings– Proceeds of the sale of real properties should be given the same tax

allowances in the case of renovation as in the case of purchase of new flats

Recent developments• Environmental load fee on air, water and soil pollution.• A new energy tax was introduced in accordance with the EU directive,

but it will be 40% higher than required by the directive.• The VAT on electricity was raised from 12% to 25%.• The annual car tax was raised by more than 20%.• The tax on company cars raised by 100%.• A 25% VAT was introduced for construction areas (until now no VAT

existed for these), which might stimulate a little more the rehabilitation of old buildings instead of construction in green areas.

• A new type of registration tax was also introduced which disfavours the buying of old cars.

• The personal income tax was reduced, however its positive effects are neutralized by an increase in the social security tax.

There is also a very negative result of all the positive changes: the extra revenues will be used to build new motorways

Some solutions

Parking fees Road pricing (see London) More funds for

• public transport• cycling• pedestrianization of streets• traffic calming• revitalization of urban space (brownfields)

Tax on green area conversion

Sources of additional revenuesin billion HUF (1 Euro=250 HUF)

Introduction of urban road charges in Budapest 40 40

Infrastructure charge – on domestic users 30 30

Infrastructure charge – on foreign users 35 35

Ton-kilometre charge to offset extra load on infrastructure

18 18

Uniform rates of daily travel allowances 6 6

Stricter rules and abolition of expense accounting for motorcar use

2o 2oo

Increased taxes on company cars 2o 2o

Sources of additional revenues – continued

in billion HUF (1 Euro=250 HUF)

Reallocation of funds estimated for the construction of new motorways and high-speed roads

90 90

Cancelling subsidies to the Formula-1 Hungarian Grand Prix

3 3

Collection of VAT on the passenger-kilometre performance of foreign buses

5 5

Increase of air tolls to the rate prevailing in the EU

9 9

Introduction of airport utilization fees 1 1

Sources of additional revenues – continued

in billion HUF (1 Euro=250 HUF)

Cancelling subsidies to regional airport investments

2 3

VAT rate reclassification of artificial fertilizers and pesticides

3 3

VAT rate reclassification of disposable diapers 1 1

Increased mining tax (hydrocarbon) 40 40

Increased mining tax (other than hydrocarbon) 3 3

Raising the rate of land protection fees 20 30

Extending the scope of land protection fees 10 20

Total (additional revenues) 1393 1763

Target area of additional expendituresin billion HUF (1 Euro=250 HUF)

Reduction of social security contribution 300 300

Family-related social welfare allowances 15 15

Transformation of the housing policy 130 130

Environmental and health protection awareness raising, information supply, education and training, culture

25 25

Compensation for increased energy prices (electricity and natural gas)

50 50

Energy efficiency schemes (from mining tax) 30 30

Subsidies to public transport in Budapest (from levied urban road charges)

40 40

Subsidies to public transport (from imposed parking fees)

20 30

Target area of additional expenditures – continuedin billion HUF (1 Euro=250 HUF)

Improvements in railway services 100 100

Subsidies to agrarian environment protection (allocating increased funds for the Ministry of Agriculture and Rural Development)

20 20

Total (additional expenditures) 1166 1197

Thank you for your attention

www.levego.hu

Clean Air Action Group Zoltán Szabó