Fleet News

Homesick for Central Europe? By Sue Rathmell, VAT director Deloitte & Touche

'THREE months ago I returned from a four-year secondment to Central Europe. I lived firstly in Prague for a little less than a year and then in Budapest.

People ask me how it feels to be back home and it's a complicated mixture of feelings. I miss my friends in Budapest and I miss the city itself - a beautiful city. The buildings remind you of Paris in a time gone by – a sort of faded grandeur.

Both Prague and Budapest are very attractive cities (hopefully the recent floods have not changed this long term) and have been extensively used for film settings - Budapest most recently posed as Berlin in The Spy Game.

I miss the weather - long hot summers. The winters were not quite so kind of course but at least it didn't rain a lot and snow can be very beautiful.

In terms of tax (since this is a column about tax and I am under some pressure to write about tax in some shape or form!), Hungary and the other Central European countries over the last 10 years or so since the end of communism, have developed sophisticated taxing systems.

They have had the benefit of being able to review tax systems in other European countries to choose the kind of system they would like to introduce.

Of course they are all under a lot of pressure from the European Union to comply with EU entry requirements.

In general, though, one criticism from me is that the tax systems put too much of the burden on to individuals and not enough on corporate entities.

This is because the countries are trying to attract global businesses, especially in manufacturing which will employ thousands of people and keep the economy buoyant in underdeveloped and deprived areas.

So corporates are offered tax holidays, government subsidies and customs-free zones while individuals pay the highest rate of tax (usually around 40%) when their taxable income hits as little as £3,000.

In my own area of tax, VAT, the EU is very specific in terms of the VAT law and all aspiring EU entrants have to comply.

Where things are not so clear for Central European taxpayers though is in the courts. Certainly in Hungary, the courts appeared to operate on a dead slow or stop basis and the decisions often come as a surprise.

In terms of cars, there is a rapidly growing market in Central Europe, which has developed from a system where you could have waited as much as 10 years for a vehicle after ordering.

Nowadays, the local manufacturers have been taken over by global car builders, Skoda in the Czech Republic by Volkswagen and Dacia in Romania by Renault. These cars have come a long way from their poor reputations in the past.

The interesting thing is that there are still many thousands of the old-style cars on the roads.

Even the pre-fabricated Trabant from East Germany has become something of an icon and a collectors' item in Hungary!

Cars are still a status symbol in Central Europe – they are becoming more accessible for people now but with the average monthly wage around £350 per month, they are not yet as accessible as they are in the UK for example.

Cars do form part of benefit packages, however, for the more highly paid workers and the expectation is that this will increase over the coming years.

Personal leasing and personal contract purchase are also on the increase and these areas will be big markets for manufacturers and leasing companies in the future.

Driving in Central Europe is easy, with good quality motorways and highways on the whole. Petrol is on the expensive side though - it is almost as much as in the UK. Taking account of the big difference in salaries and incomes, it is a luxury in Central Europe.

There are some other issues which need to be resolved. For example, there is a major problem with the theft of some makes - Mercedes, BMW, Audi and Volkswagen in particular - for sale on the black market further east. However, so far - fortunately - we have not see the kind of violent carjacking seen in Western Europe and the USA.

Overall, these are substantial markets, still nowhere near fully exploited. The coming years will bring new investment and stability from EU membership along with more EU funds and the automotive industry needs to be geared up to the challenge.'

Leave a comment for your chance to win £20 of John Lewis vouchers.

Every issue of Fleet News the editor picks his favourite comment from the past two weeks – get involved for your chance to appear in print and win!

Login to comment


No comments have been made yet.

Compare costs of your company cars

Looking to acquire new vehicles? Check how much they'll cost to run with our Car Running Cost calculator.

What is your BIK car tax liability?

The Fleet News car tax calculator lets you work out tax costs for both employer and employee