Constitutional Court scraps 98-percent special tax

Hungary's Constitutional Court has ruled that the retroactive effect of a 98% tax designed to regain severance pay was unconstitutional. The tax was aimed to cover golden handshakes made up to five years before the law came into effect.

It was the second time - after October 2010 - that the top court annuled the controversial legislation.

The Constitutional Court said the government’s move to impose the tax retroactively on such incomes earned in 2005-2009 hurt human dignity and ruled that the tax authority must refund the tax to those who had paid it already.

It also stated that parliament should pass further legislation for the tax to apply on incomes earned in 2010. In the absence of such legislation, last year’s tax would also have to be refunded if individuals request it. For this year, the tax remains in effect.

Parliamentary group leader for the ruling Fidesz party, Janos Lazar was of the view that the court’s decision was contrary to Hungary’s interests and Fidesz would propose new legislation to parliament to tax 2010 severance pay.