Hungary pays 107 billion Ft a year to persuade foreign factories to come here. Its own tax rate is already the lowest in the EU.

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A discretionary cash subsidy to a selected firm is a transfer of taxpayer resources whose allocation is decided by political officeholders, item by item, deal by deal. The decision of which firm receives how much rests on the judgement of the awarding authority — and that judgement has no market price to discipline it. There is no signal that tells the ministry whether a 50 milliárd Ft grant to one manufacturer creates more value than the same sum left with the households and firms that were taxed to fund it; the comparison is between a visible plant with a ribbon-cutting and an invisible distribution of foregone investment, wage rises, and consumption across the economy. The seen is the new factory and its announced job count. The unseen is every Hungarian firm that competes for the same workers, the same suppliers, and the same capital, now bidding against a subsidised entrant — and the wage rise the un-subsidised employer could not fund because the tax that paid the grant came partly out of its margin. There is a further mechanism. A standing discretionary subsidy programme is itself the rent. Once the state runs a 107 milliárd Ft annual fund whose disbursement is decided case by case, the return to lobbying the awarding authority rises relative to the return to serving customers better. This holds regardless of which party administers the fund and regardless of how clean each individual award is: a more transparent tender in a future government redirects the same rents to better-credentialed applicants; it does not remove the incentive that the existence of the fund creates. The structural problem is the discretionary fund, not the administrator. The classical-liberal alternative is not "no investment policy" — it is *non-discretionary* investment policy. The mechanism that has demonstrably attracted durable foreign capital is a low, predictable, uniformly-applied tax rule that every firm can rely on without negotiating, rather than a discretionary grant a minister awards. Ireland's sustained low corporate-tax regime, stable across decades and applied to all comers rather than negotiated firm by firm, drew FDI inflows among the highest in the world and built genuine capital deepening — the predictability is doing the work, because long-horizon investment is priced against political risk, and a rule removes the political risk that a discretionary programme reintroduces with every award.[^1] Hungary already has the headline instrument: a 9% corporate-tax rate, the lowest in the EU.[^5] A reform that financed a uniform rule out of the savings from the discretionary fund would attract investment through the rule, not through the minister's signature. The four-year phase-out horizon protects firms that have signed grant agreements in reliance on disbursement schedules. Multi-year investment-incentive contracts have payment milestones tied to construction and employment targets; abrupt termination would breach agreements the counterparties entered in good faith. The horizon honours in-flight contracts through run-off while closing the programme to new awards immediately.