Hungary Plans Higher Banking-Transaction Tax Starting in 2014

Hungary plans to increase a proposed banking-transaction tax by more than 10 percent to 322 billion forint ($1.4 billion) a year starting in 2014.

Revenue from an insurance levy will rise to 60 billion forint annually from 52.5 billion forint over the same period, a draft of the budget through 2016 on Parliament’s website shows. A telecommunications tax that comes into effect next year should generate 44 billion forint, according to the document.

The government is in talks with lenders over special taxes. The amount of revenue the planned 0.1 percent transaction levy will accrue depends on whether an income ceiling is imposed, whether an extraordinary 60 billion-forint bank charge is scrapped next year and on the willingness of banks to boost lending, Economy Minister Gyorgy Matolcsy said June 14.

Hungary, which wants to start financial aid talks with the International Monetary Fund and the European Union next month, is trying to wean its budget off a reliance on extraordinary taxes, which Prime Minister Viktor Orban’s government has used since 2010 to close budget holes. The economy shrank 0.7 percent from a year earlier in the first quarter, the first contraction in more than three years.

Orban has said the transaction levy will be a permanent feature of the tax code. Lenders oppose government plans to take in 283 billion forint in revenue from the tax next year, which may lead to such transactions being diverted abroad, the Banking Association said June 14.

Lender Pact

The imposition of a transaction tax without canceling the special 60 billion-forint charge would “annul” a December agreement between banks and the government to aid foreign-currency mortgage holders and boost credit, Levente Kovacs, the association’s secretary-general, told the Nepszabadsag newspaper in an interview published June 9.

As well as revenue from the transaction tax, the draft budget envisages collecting 72 billion forint through the extraordinary charge next year, including payments from financial-services companies other than banks, compared with 187 billion forint in 2012.

The charge will be scrapped starting in 2014, according to the plan.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE