The government recently announced that it will increase the special retail tax rates from 2023:
- No tax has to be paid up to a net income of HUF 500 million
- Between HUF 500 million and HUF 30 billion, the rate will be 0.15 percent instead of the previous 0.1 percent,
- Between HUF 30 billion and HUF 100 billion, instead of the previous 0.4 percent, 1 percent must be paid,
- And above HUF 100 billion, instead of 2.7 percent (2.5 in January), companies have to pay 4.1 percent this year.
From 2024, the upper key will continue to increase, From 4.1 percent to 4.5.
We looked at how much tax the 4 large retail companies, i.e. Aldi, Auchan, Penny and Spar, which recently submitted their 2022 accounts, had to pay according to the current legislation, and we estimated what special tax payment obligations they will have this year, and next year.
In 2022, the special tax payment obligation consisted of two parts. On the one hand, from the tax for the current year, the top rate of which – for net income over HUF 100 billion – was 2.7 percent (excluding January, when it was 2.5), and from a one-time additional tax, which is 80 percent of the 2021 tax. According to our newspaper’s calculation, the above four companies are close HUF 69 billion he had to pay a special sector tax last year.
Of course, this year’s income is not yet known, but we can give an approximate estimate if we correct last year’s data with the assumed food inflation of 2023. The increase in food prices exceeded general inflation by 10-12 percentage points already at the end of 2022 and this year as well. There is a consensus that the annual average inflation will still rise in 2023 compared to last year, it could be around 18-19 percent, and the price level of food 25-30 percent may be higher than last year.
In the meantime, retail turnover is falling and, although it is expected to rebound in the second half of the year, we can count on an annual average of 3-5 percent decline. This would mean that the above 4 companies can count on an income of more than HUF 2,360 billion, compared to HUF 1,940 billion in 2022.
This year, the increase in the lower tax rates means only a few 100 million tax payment surplus, but the increase from 2.7 percent to 4.1 already means a huge extra amount.
According to his calculations, the tax burden of the companies concerned may exceed HUF 83 billion in 2023.
In 2024, inflation may decrease significantly, at which time we expected a food price increase of only around 7 percent, and in the meantime the volume of trade may increase by 4-5 percent. But next year, the top tax rate will be 4.5 percent, so the tax for the four mentioned companies – at least according to our newspaper’s calculations – It can reach 104 billion.
If this scenario is realized, it means that Spar, Auchan, Aldi and Penny will pay almost HUF 260 billion in taxes over 3 years, which will most likely start a series of losses for them, but it is also possible that they will meet the their reserves, they may need capital replacement from the parent companies. If they want to avoid this, they will definitely have to increase the price of the products that are not affected by the mandatory promotions. Non-food products or non-essential goods such as soft drinks, sweets or cleaning and household products can become significantly more expensive.
In 2022, the sector as a whole, including additional tax 176 billion paid HUF special tax into the budget. Compared to this, the government already this year 205 billion expects HUF retail tax, and in 2024 this tax increase and the expansion of the tax base 250 billion planned HUF into the budget. It is therefore clear that the tax burden on the retail sector is expanding spectacularly in these years, and this extra burden forces all players in the sector to adapt.
According to our calculations, a general additional price level increase of approximately 0.8 percent may be needed from 2023 to 2024 to offset the increase in the tax burden.
Although this does not seem like a lot, it can add quite a lot when factored into inflation, since next year an average annual inflation of “only” 6% is expected.
In the meantime, it was apparent from the reports that several companies could not even make last year profitable, discounters seem to be the most viable, but Penny Market, for example, was also unprofitable. In this situation, companies receive a much higher tax. The National Trade Association (OKSZ) reacted to the news of the increase by saying that companies will be unable to continue reducing prices.
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