Ryanair has criticised a new windfall tax on airlines imposed by the Hungarian government recently. The tax will affect departing passengers as part of efforts from Hungary to flight the effects of inflation.
Ryanair has argued that it is being forced to enforce the new “illogical” windfall tax on its consumers.
A tricky situation
The new tax was unveiled by Hungary’s Prime Minister, Viktor Orbán, on 25 May. In a video, he detailed that the tax would be levied on “banks, insurers, large retail chains, energy and trading companies, telecommunications companies and airlines” to counter inflation triggered by the war in Ukraine.
The taxes, worth $2.1 billion, will apply for the remainder of this year and 2023. For airlines, it involves a tax of €10 to €25 per passenger departing from Hungary from July.
In a statement issued on 8 June, Ryanair was massively critical of the tax. The Hungarian government was labelled as “completely out of touch with reality” by following a “new and failed economic strategy of imposing ‘excess profits’ tax on loss-making airlines like Ryanair and Wizz Air” instead of following the strategy of EU governments which involves cutting travel taxes and airport charges to recover traffic, tourism and jobs post-pandemic.
The statement continued with Ryanair welcoming an investigation into consumer protection and calling on the Budapest City Council to investigate how and why the Hungarian government is introducing an ‘excess profits’ tax on a “loss-making industry such as airlines.”
Ryanair’s CEO Michael O’ Leary also commented on the matter, echoing the frustrations Ryanair clearly feels over Hungary’s decision:
“One can understand why the Hungarians might impose an excess profits tax on the oil and gas sectors, who are making windfall profits as a result of Russia’s illegal invasion of Ukraine. But to extend this ‘excess profits’ tax to a loss making industry like air travel, which is struggling to recover from 2 years of Covid, and the more recent impacts of Russia’s invasion of Ukraine, shows that Minister Nagy has forgotten his economics. We will be sending him a new booklet ‘Economics for Dummies’, which we hope he will study so he can now explain why an ‘excess profits’ tax is being imposed on a loss-making industry like airlines.”
He continued:
“At a time when many other EU countries are lowering taxes and fees to recover traffic, tourism and jobs, the Hungarian Govt. is doing the opposite by making air travel to/from Hungary more expensive and less competitive, which will damage Hungarian air-traffic, tourism and jobs recovery. We call on Minister Nagy to reverse this idiotic ‘excess profits’ tax, or at least confine it to industries like oil or gas who are making windfall profits, and not airlines who are reporting record losses.”
Ryanair has said that it may be forced to “move growth capacity to those countries that are working to restore traffic.”
Meanwhile, Márton Nagy, Hungary’s Minister for Economic Development, told the state-run news agency MTI that the government would do all it could to prevent the costs of the windfall taxes from being passed on to consumers.
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