Tag Archives: Corporation Tax Allowance

Financing of Hungarian sports: court rules it must be transparent

Even small victories can lift anti-Orbán hearts nowadays in Hungary. Thanks to the recent decision of the Kúria, Hungary’s highest judicial body, Viktor Orbán was rendered a defeat that must have hit him hard. At risk is what he considers to be one of his greatest achievements, the Felcsút Football Academy.

Transparency International spent a considerable amount of time and energy investigating the government’s lavish support of sports and came to the conclusion that the sports financing system the Orbán government established is rotten to the core. In the course of its investigation Transparency International also ascertained that the “absolute winner of the whole system is the village of Felcsút and its football club.” Felcsút has become the symbol of everything that is wrong in Viktor Orbán’s Hungary. It is a village of 2,000 people with one of the most lavish football stadiums, which can seat 4,500. The club uses all sorts of tricks to entice people to attend the club’s games, usually to no avail. The stadium is practically empty most of the time. In fact, according to those in the know, Hungarian football is dead, and the incredible amount of money that was poured into the game was an utter waste. Hungary’s FIFA standing is the same as it was before.

Over the years people have tried to find out how much money was being spent on sports, mostly football. But the system is intentionally complicated in order to hide the exact amount that comes from two main sources: direct grants allocated for sports in the budget and something called Társasági Adókedvezmény/TAO (Corporation Tax Allowance), introduced in 2011. Corporations can get a tax break if they support one or more of five sports: football, handball, basketball, water polo, and ice hockey. Money allocated to support sports is considered to be part of the tax owed. Thus, all money that is donated to these sports is a direct loss to the central budget. Since 2011, according to the latest estimate, 330 billion forints of corporate tax money was diverted to sports organizations. Or, put another, more shocking way, in the last six years the Hungarian state has given up one out of every nine forints in tax revenue.

From this money 128 billion went to football clubs and 86 billion for handball, while the rest was shared by basketball, water polo, and hockey. Viktor Orbán has been insisting for years that TAO is not public money and therefore no one has the right to learn about the sponsors, the recipients, and the amount of the money donated.

Interest in Hungarian football–Debrecen Stadium, which can seat 20,000. Cost €40 million

Transparency International, being convinced that the tax allowance is public money, asked the ministry of human resources for their allocation figures, which was denied. Transparency at that point sued the ministry. In the first instance, Transparency lost the case. The decision was based on tax secrecy. In addition, the judge didn’t consider the requested data to be of public interest. On appeal, however, the decision was reversed. Tax secrecy as a reason for denying access to the information was discarded, and the court ruled that the TAO monies are, after all, considered to be public funds. The ministry then turned to the Kúria, and on October 25, 2017 the decision of the appellate court was upheld.

Concurrently with Transparency International’s suit against the ministry of human resources, Demokratikus Koalíció (DK) sued Viktor Orbán’s Academy in Felcsút for the release of all contracts for jobs that were financed by TAO money. Felcsút apparently received about 14 billion TAO forints in the last six years. In July 2016 the Székesfehérvár Court ruled in DK’s favor, but Felcsút Academy had no intention of obliging and appealed. In February 2017 the Budapest Appellate Court also ruled in DK’s favor, but for a different reason from the Székesfehérvár Court. While the lower court considered TAO to be public money, the appellate court based its verdict on the non-profit status of Felcsút Academy. Felcsút Academy was obliged to turn over all documents relating to TAO funds within 15 days. Felcsút Academy again appealed the verdict, and thus the case ended up in the Kúria for a final decision. On November 15 the Kúria ruled that Felcsút must provide details of how they spent the enormous amounts of “public” money. The verdict could have been predicted because a month earlier, in connection with the Transparency International case, the Kúria had already declared TAO funds to be a public resource.

Index described the verdict as “the final and humiliating defeat of Orbán’s football academy.” János Lázár’s reaction a day later amply showed what kind of a country Hungary has become in the last six or seven years. During Lázár’s usual press conference on Thursday, when asked his opinion of the Kúria’s decision, he said: “There is a judge in this country who is very angry with Hungary’s government and Fidesz. His name is András Baka. Because of his changed official status, he has been greatly offended, and for some strange reason all TAO cases end up on his desk. I wouldn’t want to suppose that any bias would have influenced the judge, who on numerous occasions publicly criticized Fidesz and the government.”

Let’s stop here for a moment and go back to 2011, when the Hungarian Supreme Court became the Kúria. The chief justice at the time was András Baka who, prior to his appointment in 2008, had been a judge at the European Court of Justice for Human Rights for 17 years. Although he was considered to be a conservative judge, he became worried about Viktor Orbán’s so-called judicial reforms. He objected, for example, to the forced early retirement of judges, which gave the government a free hand to fill about 300 positions that became vacant as a result of the new law on retirement. Orbán desperately wanted to get rid of Baka and eventually came up with a good excuse. Baka hadn’t been a judge in Hungary for five years. His 17 years with the European Court of Justice were not considered relevant. Baka turned to the European Court of Human Rights and eventually was awarded about 100,000 euros, which naturally the Hungarian government, or to be precise Hungarian taxpayers, had to cough up. Baka couldn’t return to his old post, which had been filled by someone else, but he was reinstated, I’m sure grudgingly, as one of the leading judges in the Kúria.

The Kúria’s answer to Lázár was brief and to the point. They will not comment on politicians’ statements concerning their activities, but the spokesman explained that the assignment of cases is determined a year ahead and given to judges according to their professional specialties.

Unfortunately, I’m not at all sure that this is the end of the story because János Lázár intimated at the press conference that it was time “to make order” as far as TAO is concerned. To make order to me means that they will most likely come up with some modification to the law that would prevent the public from learning where that incredible amount of money has gone.

November 17, 2017