How abolishing taxes saved a dying Hungarian village
A world away from Panama, the sleepy eastern Hungarian village of Komlóska has become a kind of tax haven – to survive.
The village of 300 inhabitants is in one of Hungary’s poorest regions with high unemployment and a shrinking population.
But in 1990 the mayor, László Köteles, decided to reverse its decline by abolishing all local taxes, on companies, property, everything, though people still pay national taxes.
He told euronews: “Since there were no local companies here, we decided to just eliminate those taxes that the local council collects to help people to set up businesses, their own companies.”
But it was only after the economic crisis of 2008 that the village started to really promote itself Europe wide and companies flooded in. There are now 117 based there, a majority of them are international transportation and logistics firms which run 3,300 lorries around Europe.
The boss of one of them, Róbert Fekete of Fókusz Logistics, told us: “Of all the taxes, business tax is one of the heaviest burdens on an international logistics company, because [in Hungary] that’s two percent of our income. We have income of around one million euros a year, so we can invest that two percent in developing the company.”
The village gets back 40 percentage of the tax those companies pay to Hungary’s state government, which was 420,000 euros last year, with that money being invested in local farming and facilities like a kindergarten for local children.
Mayor László Köteles explained: “I think the state is the big winner from our ‘tax haven’, because most of the revenue that is raised goes to the state. The companies that are based here have created more than 3,000 jobs, and our trucks are on the roads with Hungarian licence plates, they pay all their fees and their insurance in Hungary.”
With the tax revenue, the village can put up matching funds to get EU grants intended to develop poorer regions, which in turn brings in more companies.
Euronews’ Beatrix Asboth, in Komlóska, reports: “This village is so remote that there isn’t even a mobile phone signal, but that’s not holding back its growth. The mayor says all they need to keep on developing is the will, cooperation and successful applications for EU grants.”
