MOL’s chief fumes over "temporary" windfall tax and criticises Viktor Orban's economic policy

MOL’s chief Zsolt Hernadi, an ally of Viktor Orban, strongly criticised the government’s windfall taxes, which were supposed to be phased out in 2023 but will be maintained for energy companies, retailers and banks in 2025. In an opinion piece published in the pro-government weekly Mandiner, he likened these levies to the prolonged presence of Soviet troops in Hungary and called for a return to conventional economic policies.

The government has not reacted to Hernadi’s comments and more tellingly other members of the pro-Orban media holding (Central European Press and Media Foundation – KESMA) has not reviewed the article

Hernadi, who shares the government's arguments that sanctions have damaged European economies, had earlier objected to the fuel price caps and special levies, claiming that short-term political interests have long-term negative economic impacts. He argued earlier that ad-hoc measures increase risks in business planning and windfall taxes set back investments.

MOL's CEO questioned the government's argument that taxes are not fed into prices. If investors are hit with new levies, they will curb spending on capital expenditures, if suppliers are targeted, then their number will shrink, which leads to the contraction of supply, hence higher prices. 

"Why penalise companies that produce products for which there is a big demand and realise windfall profits? Why punish those that successfully operate under extreme conditions?" he asks.

In the case of MOL, pre-tax profits booked at its Hungarian operation are no longer sufficient to cover the Hungarian taxes.

OTP, MBH, Richter, Telekom, 4iG and MOL have collectively paid nearly HUF800bn (€2bn) in special taxes over the past two years, the equivalent of six Mercedes factories, he argues. The German carmaker announced the green field investment in the central Hungarian city of Kecskemet in 2008 from €800mn (HUF200bn at 2008 rates), the largest greenfield investment at the time.

He asserts that "war-related overpricing", a term often used by the cabinet stems from the conflict itself and the political responses, probably referring to sanctions against Russia, but it is not companies that are to blame, he adds.

Increasing supply through investment is the best way to lower prices, but windfall taxes hinder these investments.

The state should allow industries to grow rather than draining their resources for future investments.

Hernadi also unveiled a direct criticism of the government’s economic policies, saying that if funds from windfall taxes amongst others are used to plug the deficit or finance investments that do not support economic growth, it will not create added value.

Hernadi concluded with a question: “When will normality return? When will we revert to proven methods instead of unorthodox policies?”

Despite the war and its global ramifications, MOL ended 2022 with a record profit and paid a fat dividend to shareholders thanks partially to the high spread between Ural and Brent oil, as landlocked Hungary received an exemption from buying from Russia.

MOL saw its bottom line melt down a year later due to the decline in fuel consumption and special taxes. Despite the company's challenges, Hernadi, Hungary’s 44th richest man, closed a profitable year in 2023 as his remuneration reached HUF1bn last year.