A windfall tax has been put into practice by prime minister Viktor Orban and its government. The windfall tax is levied on an unforeseen or unexpectedly large profit, especially one regarded as excessively or unfairly obtained.
This tax is imposed on drugmakers based on gross revenues in 2022 and 2023. It is estimated to enhance gradually and will rise to 8% on the net revenues exceeding 150 billion forints, equivalent to $398 million.
This sudden shift falls hard on Hungarian drugmaker Richter who is expected to pay around 28 billion forints, i.e., $74.44 million as a yearly tax. As a result, Richter might be having sorrowful tears. As a result, Richter shares are down by 4%; however, in 2022, due to favorable tax conditions, Richter tax represents around 14% of nine months’ net profit, which is more than double the same period but a year earlier.
This year Orban has imposed a windfall tax on the service sectors, including banks, insurers, energy, and airlines. He plans to narrow the deficit shortly, starting in the year 2023. It is expected to hit 6.1% of GDP this year.
Investors are rattled hearing this news and remembering the days when the populist Orban became the prime minister in 2010. This condition looks similar to fixing the budget before. The main aim of implementing a windfall tax is to avoid economic recession. But, the inflation is estimated to rise to 26-27% in upcoming months.
In a statement, Richter has shared his views ‘the tax is expected to be accounted under other expenses and thus will proportionally lower the company’s operating profit and free cash flow for 2022’. However, other financial domains in the public interest will be kept unchanged as the financial target has been set for 2022.
- Published By Team Timeswire