the Constitutional Court postponed the decision until September, the collection is undisturbed

The lawsuit launched by the Budapest municipality more than a year ago, in June of last year, against the Hungarian State Treasury, due to the solidarity contribution increased twelvefold since the Tarlós era, putting the maintenance of public services in the capital at risk. Mayor Gergely Karácsony said at the time: “The budget policy pursued by the Orbán government at the expense of local governments is against not only Budapest, but the whole of Hungary.” The city manager believed that if they win the lawsuit, it will bring about the collapse of the financing system of the entire local government sector. However, if this happens, we will have to wait at least two more months.

To understand the case, it is worth recalling the history of the legal proceedings. Budapest’s claim was rejected at the first attempt, citing a procedural error, and the lawsuit was initiated only on the obligation of the Capital Court. The Capital Court did not issue a verdict last November either, because of constitutional concerns. The court suspended the proceedings and asked the Constitutional Court (AB) for an individual norm control. It was proposed that the AB declare that the solidarity contribution conflicts with an international agreement and order the ban on its application. In the justification, the tribunal explained that “in the case of the capital, the state confiscating and confiscating nature of the solidarity contribution can be established”. This year, Budapest must pay HUF 75.5 billion into the state coffers, while it receives less than half of this, HUF 35.9 billion, as central support for the performance of mandatory tasks. The solidarity tax will increase by 30 percent this year, while local business income will only increase by 10.5 percent.

Revenge came after the election, the methodical bleeding of Budapest continues

According to the law, the Constitutional Court had 90 days to assess the request, but no decision has yet been made. To our questions about the reason for the delay, the board answered that “the judicial initiative was received by them on March 25, 2024. The appointment of the constitutional judge reporting the case was made out of turn, and he contacted the Ministry of Finance”. However, the ministry did not send its resolution to the Constitutional Court until May 10. They received an answer directly from Mihály Varga.

“In terms of the content of the solidarity contribution, it is considered a public burden (tax), since it is a mandatory monetary service without direct compensation, so in the event of non-performance, the state can also ensure its collection through coercion as a public debt,” argued the Minister of Finance in his opinion sent to the Constitutional Court, which was also called upon by the panel notes that a qualified majority is not required in connection with the tax rules and their amendments, constitutionality concerns cannot arise in connection with the provision, so according to him, “what is stated in the motion cannot even be raised”. He then added: “The AB has previously recorded that it does not examine whether the revenue sources provided by the legislation adequately ensure the economic conditions for the performance of the mandatory tasks prescribed by law for local governments.”

According to the Minister of Finance, the equality of basic rights does not mean that “every local government has an equal right to ensure that the state provides the revenue sources necessary for the performance of its duties as defined by law through the same amount of budget contribution”. After that, the Minister of Finance explains that “the amount of the solidarity contribution falls short of the business tax rates levied by local governments, so the provisions of the Charter are not violated in the case of local governments with higher incomes.” (According to the Metropolitan Court, the solidarity tax violates the European Charter of Local Governments – Ed.) He does not consider the tax to be excessive and also disputes that its collection would endanger the performance of the municipalities’ tasks.

After receiving the Minister of Finance’s resolution, the AB prepared the first draft decision within the deadline. As they wrote in their response to Népszava: “the case was included in the July 2 meeting of the 3rd five-member council, but the draft was not discussed at the council meeting, because in the meantime the president of the Constitutional Court ordered that the full meeting decide on the matter. This is expected to take place after the judicial break, in September”.

And until then, the state can collect the billions from the capital, which is already operating on overdrafts, month after month. In January and February of this year, the municipality received immediate legal protection, which exempted it from the obligation to pay, but in the months of March, April and May there was no escape. In June, the Capital Court rejected the mayor’s request for immediate legal protection, so the treasury collected HUF 2 billion from the capital’s account. (Mihály Varga also reported on this in a triumphant post.) The city administration was confident that a favorable verdict would be reached for them by the next payment deadline in July. It didn’t happen that way. The AB is “waiting” for the decision to form the new – much more politically fragmented than before – Capital Assembly, which will inherit the solidarity lawsuit among many others.

This year, the capital has already paid 15 billion into the state coffers as a solidarity contribution, so far it is not known how much more is needed