Competitive Recommendations - BBJ Interview with President Bársony and CEO Lippai-Nagy
- March 16, 2020
The American Chamber of Commerce in Hungary has made its fifth recommendation package to Hungary’s government. AmCham President Farkas Bársony and CEO Írisz Lippai-Nagy discuss the main findings with the Budapest Business Journal.
BBJ: This is the “Cooperation for a More Competitive Hungary” recommendation package. What are the main take aways for the government?
Dr. Farkas Bársony: Our recommendations target four areas in line with our policy strategy: general business climate, competitive workforce and education, innovation and digitalization. These are the main areas where the chamber can have the most impact with its influence and expertise.
The supply and development of a competitive workforce is the number one challenge right now that is why we continue to push hard for educational reforms. The revision and promotion of STEM [science, technology, engineering and math] education must be a priority. We continue to encourage the support of business-university cooperations and the expansion of dual education in order to enhance innovation.
Irisz Lippai-Nagy: Simplifying business administration is also high on our agenda. Digital administration has certainly improved, but there is still much to reduce the burden on companies, especially in taxation.
We also encourage the government to expand innovation incentives for SMEs to help them reduce the technological gap and become an integral part of the innovation ecosystem.
BBJ: You talk about the need for further tax reform, especially local business tax. The Competitiveness Council, on which AmCham has a seat, has also backed this. Do you have any sympathy with the view put forward by the Mayor of Budapest, for example, that the local business tax is vital for funding local services?
ILN: We need to create a favorable and predictable tax environment for companies operating in Hungary if we want to be more competitive. The local business tax distorts competition, particularly affecting those companies who bring higher value-added investments – the drivers of the economy.
We are aware of course that the LBT is one of the most important sources of revenue for local governments and making up for the lost revenue must be a priority.
FB: AmCham has repeatedly recommended revising the definition of the local business tax base, and now call for the expansion of tax-deductible items, such as personnel costs, and we created a detailed list of measures to reduce administrative burdens.
The proposal of the National Competitiveness Council could increase investment and stimulate innovation.
BBJ: How has recommendation package changed over the years?
ILN: AmCham always reflects on the latest economic trends and addresses the most pressing challenges the business community must face.
However, there is a number of recommendations and topics carried over from previous iterations. We are aware that changes of this magnitude need time to gain traction. Sometimes even if we are in agreement about an issue, the road to implementation is long, with plenty of hurdles.
FB: Patience is key. Reducing the corporate income tax to 9% was a hard-fought battle which took years, but our efforts came to fruition.
BBJ: What is the process now for bringing all the elements together? How long does it take?
ILN: It takes roughly a year to compile the recommendation package. In the first phase, we collect and process the feedback on our previous proposals from minister and state secretary level meetings.
FB: The finest, most devoted experts from our professional networks, the members of our policy task forces and committees provide the foundation of the package. This is where new ideas and agenda points are introduced, it is the ideal platform for knowledge and best-practice sharing.
We also gather input from members and partners at our flagship events such as the Business Meets Government Summit, organized with the Hungarian Investment Promotion Agency, one of our strategic allies.
The policy team carries out further research and finetunes the proposals. The finished document is sent to Prime Minister Orbán and his cabinet to start a new series of meetings.
Last year, we sat down with Ministers Péter Szijjártó, Mihály Varga, Dr. László Palkovics and Dr. László Trócsányi and fruitful discussions were had with State Secretary László György, Norbert Izer, Dr. József Bódis, Dr. Zoltán Nemessányi as well as various representatives of the HIPA, the National Tax and Customs Administration, the National Research, Innovation and Development Office.
ILN: In 2020, we have already met Judit Varga, Minister of Justice and we will have the honor to host Mayor of Budapest Gergely Karácsony soon.
As you can see, it is a complex process involving lots of stakeholders on various levels. It would not be possible without the commitment of our members and the openness of our partners. We are all driven by the same goal, making Hungary more competitive.
BBJ: Are you happy with the level of government uptake you have seen to AmCham suggestions? How has this improved over the past five years?
ILN: We have built a strong working relationship with the government. They count on the expertise of our membership.
Several policy measures and legislations introduced by the government are in line with our proposals. Innovation has become a top priority. AmCham has long pushed for tax and incentive system reforms to facilitate R&D and boost the local innovation ecosystem. In education and training, the business sector is slowly becoming an indispensable partner. Digitalization is also near the top of the agenda now.
AmCham has advocated for stronger industry and high education cooperation, effective career orientation and skill and competency-based education. We have seen some good movements in the right direction.
Administration is another area where Hungary has made great strides to make business easier.
This interview was published in Vol. 28, Number 5 of the Budapest Business Journal, Hungary’s leading business biweekly on March 13. If you want to become a subscriber, please click here.