No Internet tax but attacks on the United States continue

On Friday Viktor Orbán was still determined that after a national consultation the internet tax would be introduced sometime next year. Today he retreated from this position. He suggested that the internet providers’ unanimous opposition to the tax was the reason for removing the item from the government’s 2015 budget proposal. I very much doubt that the joint letter of the providers addressed to Mihály Varga had anything to do with the decision. Rather, Orbán recognized that his attempt to simply postpone the decision would not appease the multitudes of internet users. There was a very good possibility that the demonstrations would be repeated from time to time, further damaging the reputation of the government and Viktor Orbán personally. Despite this retreat, however, I have the feeling that in one way or the other curtailing internet access will be back on Viktor Orbán’s agenda. He is only too aware that almost all of the large demonstrations against his government were organized on Facebook. Social media is a danger to autocrats.

Now that this issue is behind us, I would like to return to the Orbán government’s relations with two of its adversaries at the moment: the United States and Norway. You may recall that János Lázár invited the “appropriate Norwegian minister” to meet with him either in Budapest or in Brussels. I predicted that Vidar Helgesen, the minister in question, would not oblige. And indeed, Tove Skarstein, Norwegian ambassador in Budapest, held a press conference today where she announced that Norway does not recognize the right of the Hungarian government to investigate the Ökotárs Foundation. Norway is in the middle of conducting its own probe, which will be ready by the end of November. Until then, the monies of the Norway Civic Fund will continue to be distributed through Ökotárs. It is unlikely that the Hungarian government will be the winner of this dispute. So far the Orbán government has been left holding the short end of the stick: the Norwegian Funds suspended payment of some 40 billion forints that the Hungarian government was supposed to distribute for various projects.

After the meeting of the Fidesz parliamentary caucus a journalist asked Viktor Orbán about the U.S. travel ban on the six Hungarian officials and businessmen. As we know, the reason for the ban is not just simple corruption but also American fear that the reported cases would not be investigated by the police and the prosecutor’s office. In plain English, there is a well-founded suspicion that the government is complicit in the crime itself.

Viktor Orbán does not like to talk about this sensitive topic, and apparently the subject did not come up at today’s meeting of the parliamentarians. Of course it didn’t because it was not on the agenda. When asked whether he knows the names of the six people in question, Orbán’s answer was: “if the Americans tell me, then I will be glad to tell.” The game Orbán is playing is rather simple-minded. He would gladly investigate and if necessary bring the culprits to justice, but the Americans with their stupid laws prevent him from doing so. One has to be very naive to think that Orbán does not know the names or that the prosecutor’s office could not investigate their cases.

It seems to me that there is still a huge confusion about how to deal with the frayed American-Hungarian relations. On the one hand, Viktor Orbán at least twice tried to discourage the far-right leaders of the Peace Marches from organizing an anti-American rally. On the other hand, members of his government are accusing Bunge, the American agribusiness corporation, of corruption. Bunge is most likely the company that reported the corrupt tax authority officials to the American embassy. A few days ago Magyar Nemzet accused Bunge of corruption in Argentina, and today András Tállai, undersecretary in the Ministry of National Economy, went further. According to him, “it is a very interesting situation that in the final analysis it is possible, nay it is certain, that the informer itself is involved with the fraud.” That is, Bunge is being accused of tax fraud. And that’s not all. Magyar Hírlap learned that Carol Browner, Barack Obama’s adviser on environmental matters, recently became a member of Bunge’s board of directors. And, the paper added, Browner was also a member of the Clinton administration. The headline reads: “The threads may lead all the way to Barack Obama.” Wow!  Magyar Hírlap is a big game hunter.

Bunge says it is not under VAT fraud investigation
Source: http://www.bbj.hu

János Lázár also made it clear how he feels about the United States’ role in shining a light on corruption in the Hungarian tax authority. When an MSZP member of parliament inquired about Ildikó Vida, the head of the office, Lázár retorted: “How do you know that she is involved? For an answer it would be enough to bring the flag of the United States and put it between the European and the Hungarian flags because then we would understand that behind the MSZP caucus there is the Budapest chargé of the United States.” He also suggested to Bernadett Szél (LMP) that she go to the United States embassy and ask them why they intimate that part of Hungarian officialdom is corrupt.

Meanwhile the right and far-right media are full of attacks on the stupid, ignorant and boorish Americans and their representative, M. André Goodfriend, as opposed to the Russians of Tolstoy, Chekhov, and Dostoevsky. Since we all know that a single word from Viktor Orbán would be enough to silence these hacks, we can safely assume that the rants from the staff of Magyar Nemzet and Magyar Hírlap are not against the wishes of the Orbán government.

American-Hungarian relations are crumbling

Let me summarize what we know so far about the U.S. action against certain Hungarian businessmen and government employees.

Initially it was reported that ten people were banned from entering the United States, but by now that number has been reduced to six. We definitely know of one businessman who reported on his fate to ATV. It was he who mentioned three employees of the Office of Taxation and Customs (NAV). One of the three was allegedly the president of NAV, Anikó Vida. The spokesman for the tax office did not deny the charge. If the number six is correct, there are still two people about whom we know nothing.

Although the Hungarian government feigns total ignorance of the details and keeps repeating that it is unable to move against the corrupt officials, in fact they have known for two weeks about the American resolve to pursue those Hungarians who have been trying to blackmail American firms and extort kickbacks of billions of forints from them.

M. André Goodfriend, chargé d’affaires of the U.S. Embassy in Budapest, sketched the timeline of events this afternoon. According to him, on October 6 he had a talk with Levente Magyar, one of the undersecretaries in the Ministry of Foreign Affairs and Trade. During the meeting Goodfriend explained the significance of Proclamation 7750, which is an executive order signed by George W. Bush in 2004. The Proclamation gives the State Department power to ban corrupt individuals and their families from entering the United States. Such a ban can be imposed only by the undersecretary for political affairs–in our case by Wendy Sherman, who is the department’s fourth-ranking official. (Here is a handy chart of the structure of the State Department.)

Levente Magyar must have understood the gravity of the situation because a subsequent meeting was arranged at the request of the Hungarian foreign ministry between Péter Szijjártó and André Goodfriend. This meeting took place on October 13. The American chargé repeated everything he had already told Magyar. Szijjártó then insisted that he reveal the names of those would be affected by the ban. Goodfriend in turn explained that the American government never reveals names in cases connected to Proclamation 7750. What the U.S. expects is swift action against the culprits.

Let’s stop here for a minute. I assume that Viktor Orbán was notified immediately after the encounter between Magyar and Goodfriend on October 6, and I also suspect that the prime minister’s advice was to insist on “proof” from the Americans. When that failed, in typical Orbán fashion the decision was made to launch a counterattack. NAV leaked information to Napi Gazdaság, a financial paper owned by Századvég, a consulting firm and think tank close to Fidesz, that the United States is contemplating evoking Proclamation 7750 against certain Hungarian businessmen in retaliation for NAV’s tax probes against certain American firms. If the Hungarian government hadn’t decided on this counterattack, we perhaps would never have found out about the travel ban on the six, still unnamed individuals. Colossally stupid move, but I think it is typical. Viktor Orbán always has to have the last word.

Since October 16, the day that Napi Gazdaság published its article containing the disinformation concocted by the Hungarian government, the controversy between the United States and Hungary has been escalating rapidly. The Hungarians kept insisting on “creditable proof” while the Americans steadfastly refused to fall into the trap. Moreover, while at the beginning the controversy seemed to be connected only to widespread corruption in Hungary, as time went by it became obvious that the United States might also take action against the Orbán government’s increasingly anti-democratic behavior. A day after the appearance of the accusations against American businesses in Napi Gazdaság, an article was published in Foreign Policy magazine from which we learned that “at a meeting last month, the Community [of Democracies] set in motion a process that could result in Hungary’s removal from the council and withdrawal from the Community. If Hungary leaves, it will be an international acknowledgment  that the nation has ceased to be a democracy.”

What is the Community of Democracies? It is a global intergovernmental coalition of states founded in 2000 at the common initiative of Madeleine Albright and Polish foreign minister Bronislaw Geremek. The organization is headed by a Governing Council consisting of 26 countries, among them Hungary. Apparently it was the United States that suggested that Hungary be removed from the Council and perhaps even from the organization. Or perhaps Hungary might consider a voluntary withdrawal from the Community in order to avoid embarrassment. The likelihood of an American initiative in this case was reinforced by André Goodfriend’s observation that such a move might be warranted under the circumstances.

M. André Goodfriend at one of his press conferences

While the Hungarian government is stonewalling, the U.S. chargé d’affaires in Budapest, most likely following instructions from the State Department, is delivering tougher and tougher messages to the Hungarian government during fairly frequent press conferences at the embassy. Perhaps the strongest language could be heard this afternoon when Goodfriend explained the reason for American action. In Hungary prior to 2010 the level of democracy and transparency, especially in comparison to some other post-socialist countries, was high. But while in other countries the trend is toward greater democracy and transparency, in Hungary the opposite is true. “If that trend continues it may reach a level where the United States can no longer cooperate with Hungary as an ally.” Clearly, the United States is not joking–as Antal Rogán assumed only yesterday during an interview.

Let’s return briefly to the three high officials of the Hungarian tax office who most likely are implicated in the case. In what way can they engage in fraud and corruption? Here is an explanation offered by Dávid Jancsics, who is currently conducting research at the City University of New York. His expertise is corruption. He learned from two independent sources that the NAV employees demanded kickbacks from two American companies in exchange for tax breaks and a lower VAT. Apparently they demanded 2 billion forints in exchange for these favors, money that the American companies were supposed to pay to a foundation associated with Fidesz for purposes of “research and analysis.” In addition, the NAV officials promised heavy fines on the American firms’ competitors. When the Americans didn’t bite, the NAV officials began threatening them with tax probes. It was at this point that the firms turned to the American embassy and reported the bribery attempts. The implication of this analysis, if it is accurate, is frightening because in this case the tax office is part and parcel of a corruption scheme that appears to be centrally organized.

This takes us back to an old story about a whistleblower at NAV who claimed that high NAV officials refused to investigate obvious fraud cases. András Horváth, the whistleblower, said that he was mostly involved in investigating companies that dealt in agricultural products. Index came to the conclusion that one of the two American companies in question was Bunge, a leading agribusiness and food company. It is a global firm with 35,000 employees in forty countries, including Hungary. They produce among many other things cooking oil sold in Hungary under the label Vénusz. It was well known that the management of Bunge was very unhappy about the VAT fraud and that their efforts to enlist the help of NAV were fruitless. It is possible that after a lot of complaints from the Bunge management NAV officials offered to do something about the competition’s fraudulent business practices but only at a price.

Hungarian journalists in the last few days have asked several business groups, like the German-Hungarian Chamber of Commerce, about the extent of corruption in Hungary. The answer is that foreign companies have known for years about corruption involving billions. “Hungary is a part of the Balkans” by now, and the situation is only becoming worse. According to foreign business leaders, Hungarian business life is corrupt through and through. Healthy competition is impossible under such circumstances.

Péter Szijjártó is leaving Budapest for Washington tomorrow to meet Victoria Nuland. I wouldn’t like to be in his shoes.