PM Orbán: Government may expand profit margin cap to all foodstuffs

Supermarkets’ margins over procurement prices will be capped at 10 percent for a number of staples, Prime Minister Viktor Orbán said in a weekly interview with public radio on Friday.

Supermarkets’ proposals were not enough

Justifying the profit margin cap, Orbán said prices should have fallen as the increasing chances for a peaceful resolution to the war in Ukraine showed up in the economy, noting the forint’s strengthening against the euro as well as falling global gas and crude prices. At talks with government representatives, he said supermarket chains had made proposals on price reductions, but those were “significantly short” of the government’s expectations and wouldn’t have had a tangible effect for consumers.

He said four other European countries have chosen to introduce the same measure. He said the government had a more severe intervention policy it could use if the profit margin cap did not achieve the desired results, noting this measure, too, has been implemented in a few European countries.

Orbán said the profit margin cap regulations would prohibit supermarket chains from passing on the impact of the measure to producers. Hungarian farmers may not be disadvantaged by the step, he added. He said that if the government had to introduce price caps, supermarket chains could pass those down the distribution channel, but price caps would be more of a guarantee in preventing prices from rising. “We’re still only in the middle phase,” he added.

Profit margin cap scheme can be expanded, says Orbán

The prime minister noted that the national economy ministry had selected 30 basic food products to which the profit margin cap would apply. He said he was already seeing the impact of the profit margin cap, noting that there were many discounted products, and adding that the impact would be “even more obvious from Monday” when the measure enters into effect.

“We’re Hungarians, and everyone has an idea as to how to respond to a government measure, so supermarkets will come up with something, and then we’ll respond to that,” Orbán said. “But let’s not get ahead of ourselves.”

Put to him that critics were saying that the profit margin caps could even increase inflation if supermarkets try to make up for the loss in profits by raising the prices of other goods, Orbán said this would be impossible if the government expanded the caps to all food products.

PIT cut for mothers

Concerning the personal income tax exemption for mothers under 30, Orbán said the government was building a “family career model” under which both young men and women who are employed will not have to pay personal income tax until they turn 25. If she is a woman and chooses to have a child, she will be exempt from paying personal income tax until the age of 30, he said, noting that mothers with at least two children will receive a lifetime exemption.

Because this is “very large sum in terms of the state budget”, the measure is being introduced in multiple phases, the prime minister said. He noted that the exemption for mothers under the age of 40 will be introduced on Jan 1. The following year will see its introduction for mothers between the ages of 40 and 50, and the year after that it will be introduced for mothers aged 50-60, he said.

Also, he noted, fathers are also eligible for a family tax break until their children reach adulthood.

Government building ‘family career model’

Orbán said the government was convinced that the key to mothers choosing to have children was their sense of security. “The ideal situation would be for mothers to be able to rely on healthy, vigorous, working and well-earning men,” he said. But, he added, mothers were concerned that they may not find such men or may end up alone “and suddenly all the worries and the financial burden of raising children fall on them”.

The government is therefore working to help give mothers a sense of security so that they can raise children, he said. Orbán said that whereas Western governments tended to consider personal income tax an individual, personal matter, Hungarian policymakers believed this did not correspond to reality, because most people have families.

Hungary’s government has tried to make “family life” the basis of the tax regime, which has allowed it to “take the biggest step of introducing a lifetime personal income tax exemption for mothers”, he said. This, Orbán added, would create an “unparalleled, family-centric economic system” in Hungary.

Orbán said having children was not just a personal matter, but was also “a key issue from the point of view of our national community”. This was why it was important that those who choose to have children should not be worse off financially than those who choose not to, he added.

Orbán said the situation now was “much better than before”, but it would still take a few years for the full “family career model” to be in place. “Then we’ll be very close to being able to say that those raising children aren’t worse off financially even in the short term,” he added.

He said there was no doubt that, in the long run, living in a family not only made people happier but was also more financially advantageous. But it took many years for a family to get there, and that was why this family career model was needed, he added.

2025 will be the year of breakthrough

Meanwhile, Orbán said the government considers 2025 a “breakthrough year”, and had “put all its cards on” the US joining Hungary “on the side of peace” after last year’s presidential election. “So the world is moving towards peace, which will have positive economic effects,” he said, adding that this was what the government had calculated in its fiscal policy and economic plans, and what would pave the way for an economic breakthrough.

“Now that we are in such a breakthrough, there are both favourable and unfavourable processes present for a while, because there are still bad things from the period before the breakthrough year, but good things have already emerged thanks to the new measures,” he said.

In addition to the family career model, the government has announced a programme for small and medium-sized enterprises, a scheme to build a hundred factories, as well as the expansion of access to housing and home construction, he noted.

“More and more good signs, good news are arriving, taking over from the bad news left behind from the war,” he said. “And the ratio of the good to the bad is gradually changing every day, and in the end, the bad things left behind from the war will disappear, and the good news, good conditions, and good opportunities generated by the government’s economic programme will dominate economic life,” Orbán said, outlining his expectations for 2025.

Ukraine EU accession referendum

As regards the public survey on Ukraine’s accession to the EU, Orbán said the government had decided on the technical details, although the single question had not yet been formulated, but has been assigned to the competent minister.

“Everyone has seen a National Consultation,” Orbán said. “This is the same, with the difference that now we are not asking people’s opinions on ten or so questions, but on one single question.”

Orbán said Ukraine’s accession to the EU would ruin Hungary’s economy, adding that “leaders in Brussels” wanted to admit Ukraine to the bloc “within one to two years”.

He said every member state with the exception of Hungary was in favour of continuing the war “because there’s still a pro-war majority in Brussels”. European leaders, he added, had decided that Ukraine “must continue fighting the war and will in turn receive a fast-track membership”.

“But this will ruin us,” he said, emphasising that the consequences of neighbouring Ukraine’s accession were “far more obvious, direct and fast”.

Under the EU’s basic charter, the integration of a new member must be approved by all member states, the prime minister said, adding that for this reason, “Hungary has a decisive role” in the matter.

He said that when analysing the issue, Hungary had to consider it from an economic, labour-market and health-care aspect as well as from the point of view of public safety, border protection and defence.

Balkan states should join the EU

He said Ukraine would cost the EU money, while Serbia could be admitted to the bloc “tomorrow morning”, and would “come with huge benefits for the entirety of the EU, especially Hungary”.

North Macedonia and Montenegro were in a similar situation, he said, arguing that their EU accession would “greatly expand our economic opportunities”.

“It’s no accident that Hungary is the main champion of the EU accession of the Balkan states,” Orbán said.

He called the proposal urging EU member states to spend part of their GDP on supporting Ukraine “insane”, arguing that “the future of Europe can’t be decided on the battlefield, because there’s no solution to be found there”. “It can only be decided at the negotiating table,” he said, adding that “we must aim for peace and negotiations.”

Tisza pro-war, Mi Hazánk pro-peace

Orbán said that in Brussels, “pro-peace and pro-war positions” were split along party lines, adding that Hungary’s opposition Democratic Coalition (DK) and Tisza Party “are all in the pro-war camp, while Fidesz is in the one calling for peace”.

The prime minister said he was expecting a “fierce debate” at next week’s EU summit focused on defence spending. He said that while “one camp” wanted to finance the development of the bloc’s defence capabilities from the EU budget, the other side supported joint borrowing. Under Hungary’s constitution, he noted, the government agreeing to a joint EU loan requires the support of a two-thirds majority in parliament.

“Parliament will have to take a stance on the issue before Thursday’s EU summit so that I have a mandate I can represent,” Orbán said.

Hungary, Orbán argued, should not allow member states to take out joint loans, become indebted, and “push not only their children but even their grandchildren into debt”. “I don’t think Hungary should participate in this,” he said.

Orbán added that Hungary should participate in and contribute financially to a common defence policy, “but we definitely shouldn’t do it through joint borrowing”.

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