2. Environmentally harmful measures in Hungary Zoltán Szabó Clean Air Action Group, Hungary

3. Transport – road construction programmes In 2004 the government plans to spend 260 billion HUF (1 billion Euro) on the construction of new motorways. In Hungary heavy trucks cause about 300 billion HUF of unpaid damage yearly (damage to roads, buildings, utilities; environmental pollution, health effects, accidents).

4. Existing and Planned Motorways in Hungary Yellow – places which can be reached in less than 15 minutes from the motorway Orange – places which can be reached in less than 30 minutes from the motorway

5. 1988

6. 2003

7. 2006

8. 2015

9. Road surface strengthening program, regional airports Aim: to raise the axle-load standard bearing capacity of main roads from 10 to 11.5 tons as required by the EU –Road strengthening is needed by less than 0.1% of the road users – by the heaviest trucks and buses –Cost: 1200 million Euros – Hungarian and EU taxpayers’ money (first phase approved by ISPA) Plan to develop 13 regional airports mainly by taxpayers’ money Railways are continuing to deteriorate

11. Taxes unpaid by foreign trucks Total unpaid taxes for the years 1992-2001: 2,8 billion Euros

12. Budget cut for public transport Government plans: –to shift reduced VAT rate of public transport to normal rate –decrease the state support to students and pensioners Insufficient public investment in railway infrastructure Budapest Public Transport Company needs to be financially consolidated each year A petition was handed over to State Secretary: concern about the reduction of state support for railways and public transport

13. Company car taxation Use of company cars for personal purposes to evade paying personal income tax and social security tax: loss of state revenue: more than 600 billion HUF/year (2,3 billion Euro) Compare this with the 11 billion HUF revenue in 2004 from the newly introduced energy tax! 75-95% of executives has got a company car, accompanied mostly with ‘unlimited petrol bills’ Regressive rate in company car taxation Good news: 100% increase in tax rate from 2004

14. Aviation – Malév’s bilateral agreement with East-European countries Hungary’ derogation of noise standards Malev’s bilateral agreement with East-European countries (Russia, Ukrain, Moldova, etc.) Noisy aircrafts can land in Hungary regardless of their noise emission Citizens living around Ferihegy airport bear the external costs of noise Malev’s passengers to East-Europe have increased by 22% in Jan-Aug 2003

15. Government programme for truck fleet change Road hauliers can apply to the Ministry of Economy and Transport for subsidy of purchase of trucks The programme is open for SMEs Its aim is the reduction of the burden on the environment caused by road haulage ‘Environmentally friendly’ trucks Budget of 2 billion HUF (almost 10 million Euro)

16. Reduced VAT rate for pesticides and fertilisers There is a lower (12 per cent) VAT rate to artificial fertilizers, insecticides and herbicides Producing artificial fertilizers is an extremely energy-intensive process Application of increasing quantities of nitrogen fertilizers –from 263 thousand tons in 1999 it went up to 275 thousand tons in 2001 –while the amount of manure used diminished from 3920 thousand tons to 2869 thousand tons in the same period Our proposal: Raising to 25 per cent the VAT rate applicable to artificial fertilizers and some other products

17. Taxes in OECD Member countries levied on Non-point sources of water pollution countrytypeTax rate Belgium pesticides0,248€ € per gram active substance Denmark Insecticides, Chemical products for disinfection of soil, Herbicides, Fungicides, Chemical products for reduction of plant growth 25-35% of retail value including excise duty but excluding VAT Finland Pesticides840€ for market entrance + 35% of price (excl. VAT) Norway Pesticides0,186€/daa Sweden Pesticides0,216€ per whole kg active constituent France General tax on polluting activities380-1670€ per tonne Source: OECD/EU Database on Environmentally Related Taxes, 2001 Pesticides

18. Taxes in OECD Member countries levied on Non-point sources of water pollution: countrytypeTax rate Denmark Nitrogen used by households0.6712€ per kg Sweden Artificial fertilisers -- nitrogen part0.1945€ per kg Nitrogen Sweden Artificial fertilisers -- cadmium part3.2414€ per g Cadmium Source: OECD/EU Database on Environmentally Related Taxes, 2001 Artificial fertilisers

19. Housing policy Reduced rate loans for purchase of new houses - higher for existing ones New houses are built mostly in green areas Tax rebates for new houses Proposals for an environment-saving housing policy in Hungary, which helps citizens feel secure and lead a normal life –At least 50 per cent of the subsidies to the renovation of existing buildings and the revitalization of public areas –At least 70 per cent, construction of new flats on brown fields –Homeowners be encouraged by tax allowances (VAT and personal income tax) to spend on the renovation of existing buildings –Proceeds of the sale of real properties should be given the same tax allowances in the case of renovation as in the case of purchase of new flats

20. Recent developments Environmental load fee on air, water and soil pollution. A new energy tax was introduced in accordance with the EU directive, but it will be 40% higher than required by the directive. The VAT on electricity was raised from 12% to 25%. The annual car tax was raised by more than 20%. The tax on company cars raised by 100%. A 25% VAT was introduced for construction areas (until now no VAT existed for these), which might stimulate a little more the rehabilitation of old buildings instead of construction in green areas. A new type of registration tax was also introduced which disfavours the buying of old cars. The personal income tax was reduced, however its positive effects are neutralized by an increase in the social security tax. There is also a very negative result of all the positive changes: the extra revenues will be used to build new motorways

21. Some solutions  Parking fees  Road pricing (see London)  More funds for public transport cycling pedestrianization of streets traffic calming revitalization of urban space (brownfields)  Tax on green area conversion

22. Sources of additional revenues in billion HUF (1 Euro=250 HUF) Introduction of urban road charges in Budapest40 Infrastructure charge – on domestic users30 Infrastructure charge – on foreign users35 Ton-kilometre charge to offset extra load on infrastructure 18 Uniform rates of daily travel allowances66 Stricter rules and abolition of expense accounting for motorcar use 2o2oo Increased taxes on company cars2o

23. Sources of additional revenues – continued in billion HUF (1 Euro=250 HUF) Reallocation of funds estimated for the construction of new motorways and high-speed roads 90 Cancelling subsidies to the Formula-1 Hungarian Grand Prix 33 Collection of VAT on the passenger-kilometre performance of foreign buses 55 Increase of air tolls to the rate prevailing in the EU 99 Introduction of airport utilization fees11

24. Sources of additional revenues – continued in billion HUF (1 Euro=250 HUF) Cancelling subsidies to regional airport investments 23 VAT rate reclassification of artificial fertilizers and pesticides 33 VAT rate reclassification of disposable diapers11 Increased mining tax (hydrocarbon)40 Increased mining tax (other than hydrocarbon)33 Raising the rate of land protection fees2030 Extending the scope of land protection fees1020 Total (additional revenues)13931763

25. Target area of additional expenditures in billion HUF (1 Euro=250 HUF) Reduction of social security contribution300 Family-related social welfare allowances15 Transformation of the housing policy130 Environmental and health protection awareness raising, information supply, education and training, culture 25 Compensation for increased energy prices (electricity and natural gas) 50 Energy efficiency schemes (from mining tax)30 Subsidies to public transport in Budapest (from levied urban road charges) 40 Subsidies to public transport (from imposed parking fees) 2030

26. Target area of additional expenditures – continued in billion HUF (1 Euro=250 HUF) Improvements in railway services100 Subsidies to agrarian environment protection (allocating increased funds for the Ministry of Agriculture and Rural Development) 20 Total (additional expenditures)11661197

27. Thank you for your attention www.levego.hu Clean Air Action Group Zoltán Szabó