The withdrawal of extra profit does not lead to a slowdown in the economy or an increase in inflation, reads the article published by Minister of Economic Development Márton Nagy in Magyar Nemzet.
Extra profit exists, it is not a "political statement", but an existing abnormality, which can usually be faced in crisis situations that overturn the world economic order - during world wars or oil embargoes
- wrote Márton Nagy in his opinion article published in Magyar Nemzet. According to the Minister of Economic Development, extra profit or windfall profit in economics means a very significant, unexpected, temporary jump in company profits.
Such corporate profits significantly exceed past norms and values included in business plans for the future.
The company does not plan ahead with this profit, but pockets it. Extra profit usually appears in the case of supply shortages and is typical of an entire sector, currently especially the energy and banking sectors in Hungary. In this case, due to the sudden and extraordinary rise in prices, the profits of the companies will also increase considerably, along with the burdens of the families. This process results in shock-like inflation, causing considerable shock to families, the minister wrote.
According to Márton Nagy, during the introduction of the extra-profit tax, two opposing policy goals collide: a market-friendly approach, avoiding interference in the operation of companies, and family protection, reducing the burden on families. In Hungary, in this war situation, the protection of families is extremely important, which means the protection of full employment, the protection of pensioners, the protection of the family support system, and the protection of utility reduction, he added.
Wartime inflation can be managed with price caps and a wartime extra profit tax to finance it, which also helps the budget.
Márton Nagy sees that, in contrast to profit, this wartime extra profit is already harmful, because price shocks quickly regroup significant income from families to certain companies, resulting in extra profit, and the extra profit tax returns this income.
It is easy to see that the withdrawal of unexpected, "blown" profit does not lead to a slowdown of the economy or a further rise in inflation. This is partly because there is nothing to compensate on an easy-to-come, easy-to-go basis.
On the other hand, the reaction of companies with excessive price increases can easily be avoided by the authorities in order to protect the public, he added.
An effective state pursuing a pragmatic economic policy, not an ideological one, must protect families against skyrocketing energy prices, food prices or higher loan interest rates, while still encouraging investments. Of course, it would be best for us if there were no war and senseless Brussels sanctions, no energy and food crises, and rising inflation, because then there would be no extra profit either, the article reads.
Source: origo.hu
Featured image: magyarnemzet.hu
