Don’t worry! There aren’t any such taxes for the time being. But we do have taxes on tasteless buildings, boat tax, pony tax, telephone mast tax, tractor tax, and even arable land tax – just to mention a few of the municipal taxes that add spice to our everyday lives. We aren’t completely defenceless, however, if the local authorities do try and levy any of these taxes on us.
The only limit is your imagination
Since 1 January last year, the tax laws have permitted local authorities to levy municipal taxes. It seems that the local authorities have made use of this opportunity enthusiastically, with taxes of this kind currently applied by more than 60 municipalities.
A good many of the taxes imposed are related to real estate, which is not surprising given that the payment of these taxes is the easiest to check using the property register. While several local authorities have introduced taxes on arable land, some unusual types of tax have also been created: in Csepreg, Vas County, a village with approximately 3,200 residents, the owners of fishing lakes are taxed, while in Taktaharkány, Borsod-Abaúj-Zemplén County, with a population of 3,600, the owners of reed beds are subjected to a tax.
But there are many other kinds of tax besides taxes on farmland. The telephone mast tax specifically targets built structures with a telecommunications purpose: Bodonhely in West Trans-Danubia, Pilisjászfalu in Pest County, and the villages of Gamás and Látrány in Somogy county, have all introduced such a tax. An unusual levy is the “tasteless building tax” introduced by the Óbuda district of Budapest, which is intended to prevent residential properties that are exempt from construction permission from blighting the local cityscape. The taxation of vehicles that are not otherwise liable for vehicle tax is also common: in Magyarlak, 5 km away from Szentgotthárd, agricultural tractors and their trailers are taxed, while Nagymaros stings local watercraft owners with a boat tax. But not even horses can avoid being taxed: Pilisjászfalu requires horse and pony owners to pay HUF 150,000 a year per animal.
How far do the taxation powers extend?
Although the local authorities’ taxation opportunities seem exceptionally wide-ranging at first glance, certain laws and recent judicial practice have placed constraints on their right to levy taxes. First of all, local municipalities are disallowed to tax those assets which are already subject to another type of tax. While several municipality taxes have been derailed by this restriction in the past, too, even now it is highly doubtful whether taxing arable land is lawful in the case of property owners who lease out their land. This is because they already pay personal income tax on their earnings from the land lease, and based on certain interpretations of the law this could be used as an argument against the local authority also imposing a local tax on the same piece of land. The Local Authorities Council of the Supreme Court heard a similar case recently, and nullified the arable land tax imposed by Balmazújváros on the grounds that the taxpayer was also obliged to pay a field guard supplement for the patrolling of the arable land.
The levying of a municipal tax can also raise constitutional concerns. The Constitutional Court has declared on several occasions that a tax which effectively takes away the object of the property runs counter to the Constitution. Also unlawful is a tax that does not take the taxpayers’ financial capacity into account.
When seeking to establish the invalidity of a decree it might also be a viable strategy to argue that the authority creating the law did not comply with the highest principles relating to the legislative process. For example, when drafting the law an assessment of the likely social, economic and budgetary consequences of the regulation must be performed. If this step is omitted or is not properly carried out, then in certain cases it is possible to plead the invalidity of the tax.
How to proceed?
It’s not enough to just believe that a local authority’s tax decree is invalid, it’s also important to know how you can assert such a claim. If the decree is unconstitutional, then the Constitutional Court has the authority to nullify it. But the path to that judicial body is a long one. As a taxpayer, first you have to take your complaint to the ombudsman or the government bureau exercising supervisory powers over the local authority in matters of legal conformity. You should prepare for the proceedings to drag on for years.
The situation’s different if you want to plead illegality at the time of paying a tax. In this case it’s necessary to appeal against the resolution on the levying of the tax, then file a lawsuit at the end of which, with respect to the individual case, the Supreme Court or the Constitutional Court will be called upon to decide whether the local authority really did make a mistake. But even if you do initiate a review, it’s still worth paying the tax itself, because if you end up losing in the proceedings, then in addition to the unrecoverable legal costs, you will also face tax fines and late payment interest on any taxes that were not paid on time.